UAE Non-Oil Sector Growth Slows Amid Tariff Pressures

(MENAFN- The Arabian Post)

The UAE's non-oil private sector experienced its slowest growth in nearly four years in May, with the S&P Global Purchasing Managers' Index dropping to 53.3 from April's 54.0, marking its lowest reading since September 2021. Despite this deceleration, the index remained above the 50.0 threshold, indicating continued expansion.

The output sub-index fell to 57.3, the weakest since September 2021, while new order growth slowed to 56.2, a seven-month low. These figures suggest that while demand remains strong, growth momentum is easing.

David Owen, senior economist at S&P Global Market Intelligence, noted that“the survey signals that the UAE economy is performing well, but the softer increases in output and new orders hint at momentum easing.” He attributed the slowdown to competitive pressures and weaker trade resulting from U.S. tariffs.

Inventory levels saw a record decline as firms adjusted to slower growth, and backlogs of work rose at their slowest rate in 16 months. Business optimism for future output diminished to its lowest since January.

Despite these challenges, Dubai's non-oil sector maintained steady growth with a PMI of 52.9 in May, matching April's figure. The emirate demonstrated improved demand momentum, marked by a four-month high in new order growth.

Employment levels increased at the fastest pace in a year, as businesses expanded their workforce to meet rising workloads. This hiring activity was supported by a continued increase in new orders, although firms appeared to be balancing expansion with caution amid moderating economic conditions.

The broader economic context includes global uncertainties from trade tensions and declining oil prices. The International Monetary Fund has reduced its 2025 economic growth forecast for the Middle East and North Africa region to 2.6%, down from 4% projected in October 2024. This downward revision reflects rising global uncertainties from a trade war, declining oil prices, and ongoing regional geopolitical tensions.

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The UAE's non-oil sector has been a key focus of the country's economic diversification efforts. Despite the current slowdown, the sector's resilience is evident in continued expansion and employment growth. However, the impact of external factors such as tariffs and global economic conditions underscores the challenges ahead.

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