Economic recovery in the UAE and the Gulf region is gaining pace on the back of an increase in the Opec+ quota, improvement in non-oil private sector’s performance and ease of Covid-19 restrictions amidst a decline in new Covid-19 cases, say analysts.
“The UAE’s economic recovery appears to have gathered momentum in recent months. Oil production has started to increase as Opec+ quotas have been lifted. Meanwhile, the whole economy PMI (Purchasing Managers’ Index) – which covers the non-oil private sector – hit a two-year high of 54.0 in July,” said William Jackson, chief emerging markets economist at Capital Economics.
“Daily new Covid-19 cases have continued to trend down and, on a seven-day rolling basis, are now at their lowest level since October. Against this backdrop, officials have eased restrictions further including by increasing capacity limits at restaurants, cinemas and malls in Dubai,” he added.
Data for the July PMI showed that the non-oil output growth reached a two-year high while output and new business rose at the quickest rates since July 2019.
David Owen, economist at IHS Markit, said UAE’s non-oil sector enjoyed a busy start to the third quarter of the year, as firms saw the sharpest rise in new orders for two years amid soaring domestic sales and strengthening market confidence.
As the new Covid-19 case drop below 1,000 a day in the UAE, authorities in the country announced the resumption of tourist visas from August 30 and also eased restrictions for the public and private sectors.
William Jackson of Capital Economics noted that the high levels of vaccine coverage have paved the way for policymakers across the Gulf to lift measures to contain Covid-19 over the past month or so.
“The UAE remains ahead of the pack in the vaccine race and has started to deliver booster jabs in recent weeks. Vaccine rollouts elsewhere in the Gulf have gathered pace and most countries have now inoculated upwards of 60 out of every 100 people with at least one dose. Easing restrictions, coming alongside rising oil production and higher oil prices providing scope for fiscal policy to be loosened, means that economic recoveries in the Gulf are likely to gather pace over the rest of this year and into 2022,” he added.
However, he added that bank lending is an area of weakness with credit to the private sector stuck in negative territory in the UAE as local banks were struggling with rising bad loans.
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