UAE Quarterly Update - October 2019

UAE’s growth forecast for 2019 is currently forecasted by Emirates NBD as 1.6% as it’s reported lower oil production growth, as part of the OPEC+ production cut agreement, is dragging on regional output. Positive predictions were made for tourism linked to Expo 2020. Statistics show the tourism industry was down during the summer months after an increase of 3.6% y-o-y leading up to July. Emirates NBD believe this could be linked to the weakened $USD.

UAE’s central bank reported private sector employment reportedly rose 1.0% y-o-y in Q2 2019. Emirates NBD reported the real estate sector grew whilst sectors such as manufacturing, communications and construction on the decline. Job growth was stronger within Dubai and Northern Emirates compared to others, with no reported rise in wages according to the PMI survey data.

The UAE Tender Price Index is AECOM’s assessment of construction tender prices in the UAE. It is compiled by AECOM’s Middle East Business Intelligence team based on actual returns of projects. It is based on new build and refurbishment projects across a variety of construction sectors and covers all emirates of the UAE.

The Index is therefore a measure of average price increases across differing project types and locations. It should be regarded as a guide only when looking at any specific project, as the pricing of individual projects will vary depending on such factors as their complexity, location, timescale, etc.

The relative cost of construction in the Middle East is based on typical build costs in USD. High and low cost factors for each building type have been calculated relative to the UAE (Dubai), where average costs equal 100. The relative cost bars plotted in the chart represent the average high and low cost factor for each location, based on the costs of the buildings included in the sample (excluding commercial fit-outs).

AECOM’s TPI forecast for October 2019 remains unchanged, it is expected that the tender price index will remain as forecasted at 0.1% for the full year. Noting that AECOM’s TPI increased 3.92% during 2017, and 0.94% during 2018, it appears to have captured the cost increases that have been evident during 2017-2018, as tenderers, suppliers and sub-contractors priced foreseeable material price increases in relation to Oil, Steel and VAT.