UAE's non-oil private sector growth slows due to Iran war

Abu Dhabi city

Iran war puts pressure on shipping and tourism in the UAE

A survey published on Tuesday showed that the UAE's non-oil private sector experienced its slowest growth since February 2021 in April, after the Iran war negatively impacted the shipping and tourism sectors, which in turn affected both sales and exports.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) fell to 52.1 in April from 52.9 in March, remaining above the 50-point mark in growth territory.

New orders grew at their slowest pace in more than five years, with the sub-index dropping to 52.5 in April from 54.5 in March. Excluding the pandemic, the decline in exports was the largest since the survey began in August 2009, according to Reuters.

Output continues to rise strongly, albeit at a much slower pace, supported by ongoing projects and infrastructure developments. Purchasing growth remained modest as rising costs, weak sales, and supply constraints dampened demand.

“The UAE’s non-oil private sector showed further loss of momentum in April, with operating conditions at their weakest level in more than five years,” said David Owen, chief economist at S&P Global Market Intelligence.

“However, the underlying strength of the non-oil private sector, highlighted by another strong increase in output, means firms expect growth to continue over the next 12 months,” he added.

The International Monetary Fund said in April that disruptions to the energy sector stemming from a potential war with Iran would significantly impact the economies of Gulf oil and gas exporters.

Price pressures intensified in the UAE in April, with input cost inflation reaching its highest level since July 2014 and selling prices rising at their fastest pace since June 2011. Businesses were more optimistic about the outlook for the coming year, with expectations rising to their highest level in three months.

Dubai’s headline Purchasing Managers’ Index (PMI), the region’s business and tourism hub, fell to 51.6 in April, its lowest level in 55 months, from 53.2 in March, even as more companies expressed optimism about a recovery in overall demand conditions.