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Coronavirus hits already sluggish UAE non-oil private sector in March – PMI

DUBAI (Reuters) – The coronavirus pandemic in March accelerated the downturn in an already sluggish non-oil private sector in the United Arab Emirates (UAE), bringing business conditions there to their weakest level on record, a survey showed on Sunday.

FILE PHOTO: People are seen at the Dubai Ice Rink in The Dubai Mall, in Dubai, United Arab Emirates March 12, 2020. Picture taken March 12, 2020. REUTERS/Satish Kumar

The seasonally adjusted IHS Markit UAE Purchasing Managers’ Index (PMI), which covers manufacturing and services, fell to 45.2 in March from 49.1 in February. Readings above 50 indicate expansion while those below point to contraction.

It was the biggest contraction on record, as travel and social restrictions aimed at containing the spread of the virus hurt businesses.

“New business volumes fell at a steep pace, driven by lower customer sales, reduced tourism and weaker trade as countries across the world closed borders,” said David Owen, economist at IHS Markit and author of the report.

“Meanwhile, the closure of airports in the UAE and working-from-home policies, as seen across the globe, are likely to extend the downturn into April, particularly as there is no end in sight to the pandemic.”

Dubai – the Middle East’s tourism and business hub – could see a 5%-6% loss of GDP this year if virus-containment measures were to last for another three to four months, analysts have said.

The UAE in March suspended passenger flights for two weeks until April 8 to combat the spread of the coronavirus. For the country’s vital tourism sector, this has been a heavy blow, with some hotels closed and occupancy rates dropping.

An expected bump in business this year coming from Expo 2020 – which Dubai is to host – is also in doubt after the event’s organisers backed a proposal to postpone it for a year due to the pandemic.

“The Expo 2020 remained a key source of optimism, though some were concerned of its viability in a potentially weak year for global growth,” the compilers said in the survey.

Lower overall business demand led firms to cut activities and costs in March, with output declining faster than in February, the survey showed.

Some increases in activity were registered for food sellers due to bulk-buying from consumers amid fears of food shortages due to the virus outbreak.

Employment in the non-oil private sector contracted at the quickest rate ever in the survey, which began in 2009, with firms not hiring new stuff and many asking employees to take extra leave to reduce costs.

Reporting by Davide Barbuscia; Editing by Hugh Lawson

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