UAE’s non-oil economy to make gains

UAE non-oil private companies are upbeat about profitability amid signs of economic improvement, a Coface survey shows.

The UAE economy’s growth has been slowed in recent years by the collapse in oil prices, prompting government and companies to reduce spending on projects and cutting jobs. Sharon Perry / Reuters

Private companies in the UAE operating outside the oil sector expect to be more profitable in the next six months, says a new survey. About 43.5 per cent of exporters and 42 per cent of UAE domestic suppliers forecast profitability in the next six months, with 52.2 per cent and 59 per cent respectively expecting a gain in sales from the previous year, according to the inaugural survey by Coface.

The survey also found that 39 per cent of exporters anticipated higher cash flows. Meanwhile, 43 per cent of companies said that they expected to hire new staff in the next six months, it said.

Coface polled 136 companies from 11 different industries for its survey.

“The diversified structure of the UAE’s economy has meant that domestic suppliers have been less impacted by the economic slowdown and tight liquidity conditions than exporters, which have been affected by the weak recovery in world trade,” said Seltem Iyigun, the economist for the Middle East at Coface.

The UAE economy’s growth has been slowed in recent years by the collapse in oil prices that started in summer 2014.

As a result, governments and companies have cut back on spending on projects and slashed jobs. Consumers became cautious about spending money, further dampening growth.

However, a rebound in oil prices since November has improved business confidence in the Emirates while an improvement in global trade has made economists, including those at the IMF, more upbeat about the local economy.

The non-oil economy is set to rebound this year on stronger global trade and investment spurred by Dubai Expo 2020, the IMF said on Monday.

Non-oil GDP is forecast to expand at 3.3 per cent this year with the budget deficit shrinking to 4.5 per cent of GDP, it said.

Key economic indicators for the UAE, such as the monthly purchasing managers’ index, have also been showing improvement in recent months.

A gauge of the Dubai economy says the emirate’s business conditions improved in March amid gains in output, new orders and employment.

Wholesale and retail, travel and tourism and construction industries led the advance on the Emirates NBD Dubai Economy Tracker in March, capping the index’s strongest quarter since the first quarter of 2015.

Yet while there are a number of encouraging signs of a rebound in economic growth, not everyone is totally convinced that this is the year that the economy will bounce back after several difficult years amid low commodity prices.

Standard Chartered recently downgraded its economic growth projection for the UAE as a whole for 2017 to 1.5 per cent from 2.1 per cent.

Still, Coface remains upbeat, saying that companies that do business locally have been less affected than exporters.

“The diversified structure of the UAE’s economy has meant that domestic suppliers have been less impacted by the economic slowdown and tight liquidity conditions than exporters, which have been affected by the weak recovery in world trade,” Mr Iyigun said.

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