The UAE’s PMI continued to deteriorate throughout Q1 2020, reaching contraction territory. PMI for March plummeted to 45.2, the steepest decline on record, driven by a sharp fall in new orders and employment. Output declined at a subdued rate. COVID-19 has already ignited significant economic turmoil and the negative impact on business activity (i.e. manufacturing and tourism) could intensify across the region with a worldwide recession imminent as reported by the IMF. OPEC’s decision to deepen oil production cuts in Q1 2020 imply a cut of around 2% to UAE’s oil output coupled with lower oil prices would weigh on the overall GDP regardless of production recovering to 2019 level for the rest of the year.
At a glance, the IMF anticipated 2.5% GDP growth for 2020, however it now seems highly optimistic amid COVID 19 intervention leading to postponement of Expo 2020. Emirates NBD reports that the UAE is taking steps to raise non-oil revenue with a focus on tourism growth. Lower interest rates and weaker dollar should help restore price competitiveness, support investment and consumption across the region.
Source : AECOM / IMF / UAE Central Bank
AECOM’s TPI forecast for April 2020 remains unchanged from Q4 2019. However, it is expected that the COVID-19 outbreak will have an impact on tender price index during 2020 which will be tracked in subsequent quarters.
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
Source: MEED /AECOM March 2020
Source :MEED Projects, OPEC
50=no change (Source: JPMorgan)