UAE Quarterly Review October 2020

The UAE’s PMI rose to 51.0 in September from 49.4 in August; the highest reading since October 2019. The average for Q3 was 50.4 which indicates modest growth after the fluctuations seen in Q1 / Q2. Business conditions are improving albeit slowly as output increased at a faster rate than August and an increase in export sales; a focus remains on businesses cutting costs leading to firms cutting staff numbers in a bid to reduce costs and a freeze on new hires as reported by Emirates NBD.

Recovery is expected to continue into Q4 although as a year UAE GDP is predicted to contract by -5.5% reports Emirates NBD. The OPEC oil price rose during the third quarter of 2020 after global lockdown sanctions are slowly being lifted and an agreed lower production rate - this follows record price lows during the second quarter of the year.

The UAE were the top Middle East country for projects awarded at $2.1bn reported in August 2020 . The Emirates awarded contracts within the transport, construction and gas industries including a $1.1bn contract for the Emirates second solar independent power project in the capital. Whilst construction projects activity is relatively quiet the Government is planning to encourage economic growth which should see planned new projects come to light.

During the third quarter Dubai reopened its borders and welcomed tourists under newly adopted health and hygiene protocols as it starts to recover from the COVID-19 pandemic. The Emirates were given a global safety stamp by the WTTC (World Travel and Tourism Council) in their efforts in responding to the pandemic. This should support an increased demand on air travel in the region and see an increase in passenger footfall in comparison to the reduced levels experienced in March 2020 coupled with more countries continuing to lift travel restrictions, encouraging people to travel once again.

AECOM’s TPI forecast for October 2020 reflects slight growth of 1.2% due to the increase of commodities from Q2 to Q3 2020. It is expected that the COVID-19 outbreak will continue to impact the tender price index for the remainder of 2020. AECOM forecasts tender price indices for Q3 to Q4 will remain the same and moving into 2021.

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).