Growth in the private sector in Saudi Arabia and the UAE slowed last month, with lower employment adversely affecting non-oil business activity in both countries, a monthly business survey showed.
With the oil price at an 11-year low the two largest Arabian Gulf economies face strong headwinds going into 2016.
The seasonally adjusted Saudi monthly Purchasing Managers’ Index (PMI), a proxy for growth in the country’s non-oil sector, recorded the weakest improvement in business conditions since the survey began in 2009.
The index, sponsored by Dubai-based lender Emirates NBD and produced by the data provider Markit, fell to 54.4 last month from 56.3 in November, the survey showed. Any score above 50 indicates that the economy is expanding.
Last month’s fall in the index means that the 55.4 average for the fourth quarter of last year was the weakest on record for Saudi Arabia.
The non-oil sector in Saudi Arabia was affected by slower expansion in output and new orders, as well as weak employment. Staffing levels last month stagnated, with the majority of respondents anticipating no change in employment.
“The latest PMI data shows that although growth momentum has slowed in Q4 2015, the non-oil private sector still expanded at a solid rate at the end of last year,” said Khatija Haque, the head of Mena research at Emirates NBD. “This is consistent with the official estimate for non-oil private-sector growth of 3.7 per cent, which was released with the 2016 budget at the end of December.”
Saudi Arabia revealed a 2016 budget marked by lower spending and unprecedented cuts in electricity, water and energy subsidies, moves aimed at shoring up finances that have shrunk due to lower oil revenue.
In the UAE, the PMI dropped to a 40-month low of 53.3 last month from 54.5 in November, the survey showed.
Slower growth in new work weighed on the sector, with the pace of expansion the weakest since August 2011. Output, employment and input buying also eased as firms competed to gain clients.
“The PMI data points to weaker domestic and external demand in Q4 2015, which is reflected in lower readings for new orders, employment, output and the backlogs of work,” said Ms Haque. “For 2015 as a whole, the average PMI was lower than for 2014, signalling slower – but positive – growth in the non-oil private sector.”
Slower non-oil growth in the UAE will probably be offset by oil sector expansion, which enforces the bank’s estimate of growth of 4 per cent last year, down from 4.6 per cent in 2014, she said.
dalsaadi@thenational.ae
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