The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index increased to 51.7 in July from 50.0 in June
Dubai's economy is expected to contract 5.2% this year from the impact of the coronavirus pandemic but the Middle East trade and tourism hub could see growth rebound to 4.3% next year, Japan's MUFG said.
While vital economic sectors of the emirate have been dealt a severe blow by the global health crisis, high-frequency indicators signal a normalisation in economic activity, the bank said in a report.
Also, the seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) increased to 51.7 in July from 50.0 in June, the highest reading since December last year, signalling improved business conditions.
"Dubai has been most vulnerable to the coronacrisis than other regional economies, with more than a third of the economy – wholesale and retail trade, transportation, recreation and hospitality – explicitly susceptible to physical distancing and travel restrictions," said Eshan Khoman, head of MENA research and strategy at MUFG.
But he said the wealth of the United Arab Emirates federal government protected it from the crisis and Dubai's diversified economy positioned it for a rapid recovery.
"On net, we see Dubai's economy contracting 5.2% in 2020, though next year's recovery will be robust at 4.3% as external demand recovers and the delayed Dubai Expo attracts a likely large influx of tourism inflows," he said.
Dubai was poised for a boost in income and economic activity from hosting the expo this year but the event has been postponed by a year because of the pandemic.
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