Non-oil economy robust in UAE and KSA; slow growth in Egypt: Survey
Leading UAE bank Emirates NBD released its Purchasing Managers’ Index (PMI) for the UAE and Egypt on Sunday, providing an accurate overview of operating conditions in the non-oil sector’s economy for both countries.
In the UAE, output growth accelerated to an eight-month high in May, driven by an increase in new business growth.
According to the data, the country’s non-oil private sector “regained some momentum” due to a “sharp expansion of output”.
“The improvement in the UAE PMI was mainly due to strong growth in output last month, with new business picking up as well. This confirms our view that the non-oil sector of the UAE is continuing to expand, albeit at a slower rate than last year,” Khatija Haque, head of MENA Research at Emirates NBD, said in a statement.
However, despite the expansions in output and new businesses, the growth of purchasing activity actually recorded a substantial slowdown in May, the weakest in 56 months, the data showed.
Moreover, employment was another underlying element for fragility in the UAE. While employment growth picked up following a period of stagnation in April, the rate of hiring was “marginal and among the weakest seen in nearly seven years of data collection,” the report stated.
During May, the inflation rate picked up to a seven-month high in the UAE.
In neighbouring Saudi Arabia, non-oil private economy growth reached a six-month high, with business conditions improving tremendously since last November.
“Both output and new orders rose sharply in May, with the rate of expansion in the latter picking up to a five-month high,” the report stated, adding that companies have “raised their input buying at a faster pace”.
In May, the kingdom witnessed the fastest rise in total new work this year; however, employment increased “only modestly” and, on the price front, cost pressures remained subdued.
Meanwhile, for Egypt, the Emirates NBD PMI showed that business activity shrank in May for the eighth consecutive month.
The Emirates NBD Egypt PMI for the non-oil private sector recorded 47.6 points in May, as opposed to 46.9 points in April, remaining below the 50-point mark that separates growth from contraction.
Egypt has been struggling to revive its economy, after political upheaval and security threats drove investors and tourists away.
“It’s definitely encouraging to see signs that the downturn has started to ease, as tentative as those indications may be,” said Jean-Paul Pigat, senior economist at Emirates NBD about Egypt, as quoted by Reuters.
“The survey also continues to point to fundamentally weak demand conditions across the economy, which, in light of the ongoing FX shortage, is likely to persist as we head into the start of FY2016/17,” he added.
The survey also showed that declines in employment continued in May, although at the slowest pace since February, with the related subindex rising to 46.3 points in May from 45.5 points the month before.
President Abdel Fattah al-Sisi has pledged to reduce the unemployment rate to ten percent over the next five years. It stood at 12.8 percent in December, according to the government, but analysts believe it may be much higher.
The economy grew by roughly 4.2 percent in 2014/15 and is expected to grow approximately five percent in 2015/16.