The UAE’s non-oil sector reached its highest level in over four years in December, as indicated by the seasonally adjusted S&P Global Purchasing Managers’ Index (PMI). The impressive growth, driven by substantial increases in output and new orders, positions the sector for continued expansion in 2024.
Robust growth
The PMI for December climbed to 57.4, up from 57 in November, marking its highest reading since mid-2019. This growth signals a robust improvement in the health of the UAE’s non-oil sector. Increases in both output and new orders contributed significantly to that growth. Moreover, data suggests that economic trends in the UAE’s non-oil sector remained exceptionally strong at the close of 2023.
Additionally, projections for future growth are among the strongest recorded since early 2020, indicating a positive sentiment among businesses, with year-ahead expectations ranking among the highest seen since before the COVID-19 pandemic.
Non-oil sector’s contribution
The non-oil sector in the UAE constitutes about 71 percent of the country’s gross domestic product (GDP). It demonstrated a 5.9 percent growth in the first six months of 2023. UAE Minister of Economy H.E. Abdulla bin Touq Al Marri highlighted the non-oil sector’s pivotal role in expanding the UAE’s economy which witnessed a 3.7 percent growth in the first half of 2023. Moreover, the sector’s growth aligns with the country’s economic diversification goals.
Moreover, the Central Bank’s revision of the UAE non-oil sector growth forecast to 5.7 percent, up from 4.3 percent, highlighted the continued robustness of private sector economic activity.
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UAE’s economic resurgence
The UAE’s economic rebound in 2022 marked a remarkable 7.9 percent growth. This positioned it as the fastest-growing economy in 11 years, reaching AED1.62 trillion ($441 billion) at constant prices. This resurgence was fueled by higher oil prices and government measures to mitigate the pandemic’s effects. Despite challenges, the UAE’s GDP was estimated to expand by 3.6 percent in 2023.
The government has adopted various measures that have enhanced the economy’s resilience, counteracting challenges such as inflation, monetary policy uncertainty, and global economic slowdown. Hence, strong domestic market conditions and the softening of price pressures contributed to growth in new work and sales pipelines in December.
While inflationary pressures persisted, the drop in prices suggests that businesses are keen on keeping profit margins low amid increasing market competition. The easing of purchasing growth and a reduction in material costs contributed to a five-month low in overall cost pressures. This, in turn, allowed for increased staffing levels and job creation.
OPEC’s view
The Organization of the Petroleum Exporting Countries (OPEC) emphasized in its Oil Market Report that the second-largest Arab economy remains robust. Constant contributions from the UAE’s non-oil sector, including tourism, leisure, and real estate drive that growth. Hence, the UAE’s tourism sector accounts for more than 16 percent of the country’s GDP. It continued to rebound and even exceeded the pre-pandemic level in terms of the number of visitors. Thus, the number of visitors to Dubai rose by 19 percent year-on-year in the first half of 2023.
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