UAE economy rides high on non-oil sector

In the world of data and numbers, two criteria assume importance when it comes to ascertaining the health of an economy. First of course is the GDP, and second is Purchasing Managers’ Index, or PMI, which is among the most relied monthly data for measuring the overall health of the economy. A reading above 50 signals expansion, and notably, for the UAE, the data is getting encouragingly positive. At 57.3, the PMI for private non-oil sector has climbed to a 30-month high in August from 56.0 in July. The numbers show a pattern of recovery as the new orders have expanded at the fastest pace since February 2015, and there has been a record rise in inventories. Investment in real estate, construction business, and projects like Expo 2020 could be fuelling the enthusiasm. New export orders have also risen for the first time in three months. The change is evident in the UAE’s automotive imports, too, which is very sensitive to the economic cycle. Since last year, there has been a modest uptick in the annualised import figures. It’s amply evident that the UAE’s decision to wean itself off oil revenues is paying dividends.

The sharp rise in business activity in the private sector has a domino effect and bodes well for the economy in terms of job creation. Statistically, industry experts are projecting the non-oil sector growth at about 3.2 per cent in 2017 and 3.3 per cent in 2018, up from 2.9 per cent in 2016. However, much ground still needs to be gained as non-oil sector in the UAE has seen better days with an average annual growth rate of 6 per cent achieved during 2011 to 2014. The economic environment remains challenging due to low oil prices. But as the PMI data projects, business sentiment remains positive and further improvements are expected in market demand and economic conditions. Overall, such exuberance in the non-oil sector would prop up the overall economy and by 2018 the UAE growth would rebound to 2.9 per cent. The future looks bright.