World oil prices may be hitting multi-year lows, but the UAE’s non-oil economy is chugging along at a good clip, the latest data show.
September’s monthly survey of 400 purchasing managers in the UAE by HSBC, released yesterday, showed that “activity in the UAE’s non-oil producing private sector rose at the fastest pace since June … with companies commenting on increased order intakes,” the bank said in its report.
The upbeat indicator runs counter to the broader tone of economic slowdown set yesterday by the IMF, with the release of its latest World Economic Outlook in Washington. As expected, the IMF trimmed its forecast for next year’s global economic growth to 3.8 per cent from the 4 per cent it forecast in July. The IMF report supported other data showing a mixed picture for larger economies, with the US picking up but Germany and other European economies, as well as Japan, China, Russia and Brazil, all showing signs of slowing.
But the UAE is not alone among Middle East economies showing some resilience. Saudi Arabia and Egypt are also indicating expansion in their non-oil economies.
HSBC’s series of purchasing managers indexes (PMIs) are a broad survey-based gauge of economic activity and are tracked by a wide range of policymakers, including central banks. The UAE September survey put its PMI at 57.6, which although easing slightly from the previous month’s record high 58.4, was above the long run average of 54. Any reading above 50 signals growth.
Commenting on the report, Razan Nasser, senior economist for Middle East and North Africa at HSBC said: “Numbers continue to indicate we are in a good stage in the economic cycle. Output continues to grow while price pressures remain under control.”
Others also see encouraging signs. Jason Turvey, Middle East economist at Capital Economics in London, said the UAE PMI numbers underpin a longer-term trend whereby some of the region’s economies – especially the UAE – are becoming less dependent on the oil and gas sectors. “In terms of the UAE non-oil sector, it is actually performing quite well. Dubai in particular is exposed to developments in the global economy, largely in its role as a logistics hub for trade between Asia, Europe and Africa,” Mr Turvey said.
The UAE economy has continued to make gains even though the important real estate sector has slowed, with both private housing and commercial property markets softening in the latter half of this year. The fears of another bubble have subsided and the slowing does not seem to have had a dragging effect on the economy as a whole.
Meanwhile Saudi Arabia’s “whole economy” PMI, which also takes the pulse of the entire non-oil private sector, rose in September to 61.8 from 60.7 in August and was the survey’s highest reading in more than three years.
Egypt is also showing economic strength as it continues to recover from its post-Arab Spring turmoil. The country’s PMI rose to 52.4 in September from 51.6 in August, the second consecutive month that it has been above 50, indicating a quickening expansion.
Separately, the IMF’s outlook for the Middle East and North Africa was mixed. It pointed to the turmoil continuing in Syria and Iraq, potentially spreading farther afield. While noting that this had yet to have an effect on oil prices, the IMF chief economist Olivier Blanchard said: “Clearly this could change in the future, with major implications for the world economy.”
The IMF cut its growth forecast for the Middle East and North African region as a whole to 2.6 per cent for this year, down from a 3.2 per cent forecast in April. But the IMF said growth in the six-nation GCC countries will remain strong at an average 4.5 per cent in 2014 and 2015. It increased its economic growth projections for Qatar, Saudi Arabia and the UAE, but lowered those for Kuwait.
amcauley@thenational.ae
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