UAE private sector business activity rebounds from 30-month low

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index, which covers manufacturing and services, rose to 54.5 last month from 54.0 in October.

The UAE non-oil economy is said to still be expanding at a solid rate. Pictured, workers make Abu Dhabi street signs. Mona Al-Marzooqi / The National

The economies of Saudi Arabia and the UAE showed a mild improvement in November, according to a monthly survey of businesses. But economists believe that the impact of low oil prices and a slowdown in infrastructure spending will lead to continued low growth rates in the two countries.

The UAE’s monthly Purchasing Managers’ Index, a proxy for growth in the country’s non-oil sector, increased last month to 54.5, up from 54.0 in the previous month.

“The PMI data points to slower non-oil growth in the UAE this year relative to 2014,” Khatija Haque, head of Middle East and North Africa research at Emirates NBD, said in a statement, citing “the sustained weakness in oil prices, tighter liquidity conditions, and increased uncertainty about government spending in the region”.

However, she said that the economy was still growing at “a solid rate” despite this.

Saudi Arabia’s PMI index increased to 56.3 last month from an all-time low of 55.7 in ­October.

“It’s important to remember that the PMI data mostly measures sentiment,” said Jason Tuvey, an emerging markets economist at Capital Economics “and the long-run outlook for the UAE is that growth will slow further” on the back of cuts to spending and slower demand from abroad.

The Central Bank’s Economic Composite Indicator, published this month, said growth in the third quarter slowed to an annualised rate of 2.7 per cent – its slowest since 2010.

Both economies have been hit by the collapse in oil prices from $110 per barrel in June last year to less than $50 now. The IMF predicts that the UAE’s non-oil economy will grow by 3.4 per cent this year and 3.6 per cent next year. The non-oil economy accounts for about 50 per cent of Abu Dhabi’s economy, and more than 80 per cent of Dubai’s.

Saudi Arabia, where the non-oil sector accounts for a much smaller share of economic activity, will experience growth of 2.1 per cent this year and 2.3 per cent next year, the IMF predicts.

Government officials from both states have also said that infrastructure spending will slow over the coming year, as non-essential construction projects are delayed.

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