Business activity in the non-oil private sector economy of the UAE reached its highest point in over four years in December. This surge was attributed to a significant increase in both output and new orders, laying the foundation for ongoing expansion in the coming year.
In December, the seasonally adjusted S&P Global Purchasing Managers’ Index, a crucial indicator of the nation’s non-oil economy, rose to 57.4 from November’s 57. This marked its highest level since mid-2019, comfortably surpassing the neutral 50 mark that separates growth from contraction.
Robust Growth Signals Health Boost for UAE’s Non-Oil Private Sector
The growth observed reflects a robust improvement in the health of the UAE’s non-oil private sector. This positive trend is attributed to substantial increases in both output and new orders, as revealed by the PMI data released on Thursday.
“Economic trends in the non-oil sector of the UAE continued to exhibit exceptional strength towards the conclusion of 2023, with the UAE PMI recording its second-highest reading in four-and-a-half years,” the statement reported.
Forecasts for upcoming economic activity were among the most robust since early 2020.
“The non-oil economy in the UAE concluded the year with another notable expansion, affirming the most potent quarterly upswing since Q2 2019 and positioning the sector favourably for 2024,” commented David Owen, senior economist at S&P Global Market Intelligence.
“Businesses not only experienced a significant rise in output but sentiment data indicated an anticipation of sustained growth, with year-ahead expectations reaching levels unseen since before the onset of the Covid-19 pandemic.”
In October, Minister of Economy Abdulla bin Touq stated that the UAE economy achieved a 3.7 per cent annual expansion in the first half of 2023. This growth was propelled by robust developments in the non-oil sector, aligning with the nation’s ongoing efforts to diversify its economic activities.
During the same period, the non-oil sector, contributing to approximately 71 per cent of the country’s gross domestic product, recorded a remarkable 5.9 per cent growth, as highlighted by the minister.
UAE’s Economic Rebound in 2022 Sets New Records: 7.9% Growth, AED 1.62T Total GDP; Projections for 2023 Highlight Resilience Amid Global Challenges
In 2022, the UAE economy experienced a robust recovery from the slowdown induced by the Covid-19 pandemic, achieving a notable growth of 7.9 per cent throughout the year. This marked the highest growth rate in 11 years, bringing the total to AED 1.62T ($441B) at constant prices. The resurgence was driven by elevated oil prices and government initiatives aimed at alleviating the pandemic’s impact.
The projected expansion of the country’s GDP for 2023 is estimated at 3.6 per cent, as indicated by Mr. bin Touq. Despite challenges such as inflation, uncertainty in monetary policy, and a deceleration in global economic growth, the government’s diverse set of measures has enhanced the resilience of the economy.
The PMI survey findings revealed on Thursday that strong conditions in the domestic market contributed to improvements in new work and sales pipelines in December. This positive trend persisted despite signs of slowing momentum from external markets.
Mr. Owen noted that the optimism was supported by a softening of price pressures, with purchasing costs experiencing the least degree of increase in almost a year.
Additionally, with mild wage pressures, firms were often inclined to offer promotions and reduce prices to stay competitive. Although the drop in charges, the quickest since July, may support additional sales growth in early 2024, the findings suggest that firms are still maintaining low profit margins due to increasing market competition.
Deciphering Economic Trends: Inflation Eases in Non-Oil Sector, Job Creation Surges; Egypt Grapples with Sales Decline and Ongoing Inflationary Pressures
In the non-oil sector last month, the inflation picture was partly influenced by a relief in purchasing growth, with some vendors reducing material costs after negotiations with clients.
Purchase prices saw the least extent of increase since January 2023, leading to an overall decrease in cost pressures to a five-month low. Consequently, companies expanded their staffing levels, with job creation pace aligning with the series’ long-run trend, as per the survey.
Meanwhile, in Egypt, the non-oil private sector economy continued to soften in December, with new orders declining at the sharpest rate since May. The S&P Global Egypt purchasing managers’ index inched slightly higher to 48.5 in December from 48.4 in November.
Mr. Owen highlighted that the Egypt non-oil economy concluded the year with the fastest drop in sales for seven months in December, indicating that the impact of inflation on demand conditions has not diminished.
Inflationary pressures are still largely driven by economic challenges stemming from the Russia-Ukraine war, including a significant depreciation of the Egyptian pound against the US dollar, leading to increased buying costs, according to The National News.