UAE businesses record softest growth rate in 12 months

Business conditions in the UAE improved at the softest rate since January 2022 amid slower increases in output, new orders, and employment.

The latest S&P Global UAE Purchasing Managers' Index survey pointed to a slight loss of growth momentum for non-oil businesses at the end of 2022, as output and new business rose at the slowest rates since September 2021.

The PMI index dipped fractionally from 54.4 in November to 54.2 in December, bringing the index in line with its long-run series average (since August 2009). The reading indicated a robust improvement in the health of the non-oil sector, albeit one that was the softest since January,” said the survey report.

David Owen, an economist at S&P Global Market Intelligence, said the UAE PMI fell for the second month in a row to 54.2 in December, almost registering the lowest reading in 2022 (54.1 in January 2022) and providing further signs that growth momentum has moderated from its post-pandemic peak in the third quarter.

“The slowdown reflected downward movements in three of the PMI's largest components, with output and new business growth both easing to 15-month lows, whilst employment rose at the softest rate in eight months.”

Weakness in the global economy led to the first decrease in new export business since August 2021.

"Businesses were less confident that output growth would be sustained in 2023, as year-ahead expectations fell to the weakest level since February 2021 amid concerns that economic problems abroad will seep through into the domestic economy,” said Owen.

In the quarterly review report for the third quarter of this year, the Central Bank of the UAE revised real output growth for 2023 to 3.9 per cent as the oil GDP is expected to grow by 4.2 per cent while the non-oil GDP is expected to grow by three per cent. Most economists forecast that like its GCC peers, the UAE will remain on track to post a steady GDP growth of around five per cent in 2023 regardless of the global recession and geopolitical tensions.

For GCC, the GDP growth forecasts have been slightly revised upward due to a combination of continued strong oil revenue for the oil-exporting nations, which will provide a buffer for their non-oil economies and allow them to run sizable fiscal surpluses, according to PWC Middle East.

While domestic demand conditions are holding up relatively strong, weakness in the global economy led to the first decrease in new export business since August 2021.

"Businesses were less confident that output growth would be sustained in 2023, as year-ahead expectations fell to the weakest level since February 2021 amid concerns that economic problems abroad will seep through into the domestic economy. On the positive side, firms enjoyed a renewed fall in their expenses as commodity prices moderated and input availability improved, which supported an additional cut to selling prices."

The report noted that waning demand conditions had led businesses to make fewer staffing additions despite challenges to operating capacity. “Amid increased concerns about the global economic outlook, expectations towards future output slipped to their lowest level since February 2021. More positively, firms recorded a fractional decrease in input costs as improving supplier availability underpinned lower material prices,” said the report.

December data meanwhile signalled a renewed decrease in overall cost burdens across the non-oil economy.

— issacjohn@khaleejtimes.com

• Business