UAE's non-oil economy business conditions continue to improve

Overall upturn in new business was still robust in November despite global economic uncertainty

The UAE economy is set to expand at its fastest pace in more than a decade this year. Boomberg

Business activity in the UAE’s non-oil private sector economy continued to improve in November as the Arab world's second-largest economy is set to grow at its fastest pace in more than a decade this year, owing to a rebound in tourism, construction and activity related to Expo 2020 Dubai.

The seasonally adjusted S&P Global purchasing managers’ index softened to 54.4 in November, from 56.6 in October, remaining well above the neutral 50 mark that separates growth from contraction.

Despite global economic uncertainty, slowing growth and higher inflation around the world, “the overall upturn in new business was still robust”, with several panellists citing new project work, increased tourism and advance orders, according to the survey.

The UAE's non-oil foreign trade in the first nine months of this year increased 19 per cent to about Dh1.64 trillion ($446 billion), from the same period in 2021, the Ministry of Economy said on Wednesday.

The tourism sector’s revenue topped Dh19 billion during the first half of this year and total hotel guests in the same period reached 12 million.

Growth in the number of hotel guests climbed 42 per cent, compared with the same period before the pandemic.

Non-oil activity in November also rose at a sharp but slower rate in November according to the PMI survey, which contributed to a further increase in company inventories.

Output mainly expanded due to higher demand, with some companies citing that current projects had also sustained growth.

“The headline reading of 54.4 suggests that UAE businesses are still enjoying robust growth, a feat that is becoming more difficult to achieve in the global economy,” said David Owen, an economist at S&P Global Market Intelligence.

“Adding to this, UAE firms are seeing little pressure on input costs, which rose at the softest pace for three months and only marginally.”

UAE companies reported a modest increase in staff numbers during November, and while it was softer than October's recent high, the rise in job levels was one of the fastest in the past five years, alleviating some capacity pressures.

Last month, the International Monetary Fund said it expected the UAE economy to grow by more than 6 per cent this year, after expanding by 3.8 per cent in 2021.

An expansion of 6 per cent would be the highest since 2011, when the economy grew by 6.9 per cent.

The UAE economy expanded by 8.4 per cent in the first quarter of this year, exceeding initial estimates, as a result of higher oil prices and successful Covid-19 mitigation measures.

The fund expects the country's non-oil economy to grow by about 4 per cent in 2023 and to accelerate on continuing reforms.

Despite global economic uncertainty and headwinds, higher oil prices and healthy fiscal buffers will help the UAE to mitigate risks, the IMF said.