Non-oil private sector economic activity in the UAE improved in March after a weak February performance, thanks to increase in new orders and improved demand.
3.5% Economic growth expected in 2019 20% Increase in FDI estimated this year
dubai — Non-oil private sector economic activity in the UAE improved in March after a weak February performance, thanks to increase in new orders and improved demand.
The signs of stronger market demand provided a boost to business confidence, with optimism hitting a new record high at the end of the first quarter, said the Emirates NBD Purchasing Managers’ Index (PMI), compiled by IHS Markit,
The Index recovered from the 28-month low of 53.4 in February to 55.7 in March 2019.
“After a surprisingly weak February reading, it was encouraging to see the headline PMI recover to a 55-handle in March. The acceleration in output and new orders suggests that demand has improved, although this was likely supported by further declines in selling prices in March. The environment remains competitive for businesses,” said Khatija Haque, head of Mena Research at Emirates NBD.
The non-oil sector’s economic activity in the UAE is expected to pick up in the coming months as companies rush to complete their projects and inflow of foreigners will pick up ahead of Dubai Expo 2020.
In addition, the country will also reap the benefits of the ease of doing measures announced last year by the different emirates in the forms of reducing certain government fees, waiving off fines, 100 per cent foreign ownership and long-term visas for professionals and high net worth investors. All these measures will attract more foreign direct investment into the country and improve the country’s economic growth.
The UAE’s GDP, according to Central Bank forecast, will expand 3.5 per cent this year as compared to 2.8 per cent last year. While the Ministry of Economy has predicted 20 per cent increase in FDI this year.
Khatija Haque of Emirates NBD Research said employment was also marginally positive last month, although fewer than three per cent of firms surveyed reported hiring in March.
“The growth in inventories, together with a rise in the future output component suggests that businesses are more optimistic about
their prospects than they have been in recent months,” Haque added.
Emirates NBD data revealed that the improvement in business conditions reflected sharper increases in output, new orders and stocks of purchases, as well as a return to job creation. These all in some way were linked to anecdotal evidence citing signs of an improvement in market demand during March 2019.
Some panellists suggested that discounts were offered in order to secure sales in a competitive environment. Output prices decreased for the sixth successive month in March. Competitive pressures were also evident further up supply chains, with firms’ purchase costs rising only slightly.
The rate of expansion in new export orders quickened at the end of the first quarter, recovering from February’s 11-month low amid reports of greater new orders from other GCC countries and the US.
Employment levels stabilised in March, having fallen solidly in the previous month. Higher new orders encouraged some firms to take on extra staff, but others maintained cautious hiring policies. Backlogs of work, meanwhile, increased at the slowest pace for a year.