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Business activity in the UAE’s non-oil private sector economy continued its strong expansion at the start of 2023, showing resilience in the face of global economic headwinds, as output and new orders rose along with employment in the Arab world's second-largest economy.
The seasonally adjusted S&P Global purchasing managers’ index softened marginally to 54.1 in January, from 54.2 in December, staying well above the neutral 50 mark that separates growth from contraction.
Although the pace of growth was softer than post-pandemic highs achieved in the second half of 2022, it signalled “another solid improvement” in the non-oil economic sector's performance, despite a weaker global economic outlook and higher inflation, according to the survey.
“The results showed that the non-oil sector remains in good health and in particular compares positively against a global economic slowdown towards the end of 2022,” David Owen, senior economist at S&P Global Market Intelligence, said.
Output growth remained robust, albeit at a softer pace at the start of this year. A fifth of businesses surveyed, reported a rise in their output levels in January over the previous month, while just 2 per cent recorded a decline. Growth was mainly driven by higher sales, push to complete existing projects, according to survey panellist.
UAE non-oil companies also reported a sharp increase in new order inflows in January, hitting the fastest pace in three months. Overall sales growth, however, was affected by lower export orders, amid weakening global economic conditions.
The world economy is estimated to grow at 2.9 per cent this year, slower than the 3.4 per cent expansion in 2022 and below the historical average of 3.8 per cent over the 2000-2019 period, the International Monetary Fund said in January.
The global economy is still facing headwinds from higher inflation, rising interest rates and the continuing war in Ukraine and but more work needs to be done for a full recovery to take place, the IMF said in its latest World Economic Outlook report.
Against this backdrop, the UAE economy has made a strong rebound from the coronavirus-induced slowdown over the past two years and the pace of economic momentum has continued to improve on the back of government initiatives, higher oil prices, a strong performance in its real estate sector and a rebound in travel and tourism.
The UAE economy is estimated to have grown by 7.6 per cent last year, the highest in 11 years, after expanding by 3.9 per cent in 2021, according to the UAE Central Bank.
Overall, the country’s economy is projected to grow 3.9 per cent in 2023, while non-oil sector expansion is estimated at 4.2 per cent and oil GDP projected at 3 per cent, according to the central bank.
The UAE's non-oil foreign trade in the first nine months of 2022 grew 19 per cent to about Dh1.64 trillion ($446 billion), compared with the same period in 2021, according to the Ministry of Economy.
The tourism sector’s revenue topped Dh19 billion during the first half of last year and the total number of hotel guests in the same period hit 12 million.
Growth in hotel guest numbers climbed 42 per cent from the same period before the pandemic.
January data also signalled subsiding inflationary pressures across the non-oil private sector, as input prices were broadly stable for the second month running.
Robust supply chains and stable energy and transport price in January helped to keep costs steady, panellists, said.
Non-oil private sector companies also remained positive about the future business outlook, as the degree of optimism picked up, with businesses hoping that market conditions will continue to strengthen amid continued economic recovery.