UAE Non-Oil Sector Navigates Fluctuating Growth Amidst Global Headwinds
The UAE’s non-oil business sector has experienced a dynamic period of growth, marked by both robust expansion and notable slowdowns across various months. Recent Purchasing Managers’ Index (PMI) reports indicate a mixed landscape, influenced by factors such as demand fluctuations, competitive pressures, and global trade uncertainties.
January Sees Robust Start
- The year 2025 began strongly for the UAE’s non-oil private sector, with the S&P Global UAE PMI registering 55.0 in January. This figure, while slightly down from December’s 55.4, still indicated significant expansion.
- New orders and business activity saw sharp increases, supported by favorable market conditions and easing cost pressures. Input cost inflation reached a 13-month low.
- Despite the positive start, capacity pressures persisted, leading to the fastest rise in backlogs in eight months. Business confidence, however, dipped to its lowest since December 2022, reflecting concerns about sustaining revenue growth amidst strong competition.
March and May Witness Slowdowns
- Growth moderated in March, with the PMI slipping to 54.0 from 55.0 in February, marking the slowest pace since September. New order growth also slowed for the third consecutive month.
- Employment growth in March hit its weakest level in nearly three years, as firms faced challenges in finding suitable candidates.
- May saw the most significant slowdown, with the PMI falling to 53.3 from 54.0 in April, reaching its lowest reading since September 2021. This was attributed to competitive pressures and weaker trade stemming from US tariffs.
- Output expansion in May was the slowest in 44 months, and business expectations for future output were subdued, reaching their lowest point since January.
April Shows Steady Growth and Hiring Surge
- In contrast to the slowdowns, April maintained steady growth, with the PMI holding at 54.0, unchanged from March.
- Employment saw its fastest increase in 11 months, as firms focused on reducing workloads and supporting new business. This hiring surge was primarily aimed at clearing backlogs, which, despite still rising, did so at the slowest rate in six months.
- New order growth quickened slightly, driven by the strongest upturn in international demand in five months.
Dubai’s Performance Mirrors National Trends
- Dubai’s non-oil private sector largely mirrored the national trends, experiencing slowdowns in March and April, with PMIs of 53.2 and 52.9 respectively.
- In May, Dubai’s PMI remained steady at 52.9, with new order growth quickening to a four-month high, indicating a solid expansion in operating conditions despite the broader national slowdown.
Outlook and Economic Diversification
Despite the fluctuating monthly performance, the UAE’s non-oil sector remains optimistic about future growth, supported by strong sales pipelines and national infrastructure development. The nation continues its strategic focus on economic diversification, investing heavily in sectors like technology, manufacturing, tourism, and trade to reduce reliance on oil. The Central Bank projects robust non-oil growth of 5.1 percent in 2025, underscoring the resilience and potential of the sector amidst global economic uncertainties.
Sources
- UAE non-oil business sector growth slows in March, PMI shows, Reuters.
- UAE non-oil business growth slows in May, PMI shows, Reuters.
- UAE non-oil business sector expands robustly in January, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
- UAE non-oil business activity down in May amid tariff pressures, The National.
