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The UAE’s non-oil economy appears immune to some of the production slowdowns seen in the global economy in the third quarter of 2022, recording some of the fastest expansion rates seen in the past three years. Foreign criteria have helped companies boost business and employment, in stark contrast to the global picture of an economic slowdown.
The UAE’s non-oil sector has noticed a sharp acceleration in the industry’s expansion since the peak of the COVID-19 pandemic. With an upward trend since the beginning of 2021, the expansion rate reached its highest point in more than 3 years in August. with around 32% of respondents noting a recovery in production compared to the previous investigation period. While expansion slowed in September, it remained strong overall, with businesses reporting that strong demand encouraged them to pursue further business.
The strength of the recovery over the course of 2022 so far is remarkable for two reasons. First, the recent expansion comes from Expo 2020, between October 2021 and March 2022, which has had a massive impact on tourism and new business. The sustained recovery suggests that businesses continue to benefit from increased investment and stronger economic activity.
Second, the expansion of the non-oil sector contrasts with a faltering global economy, which saw production contract in August amid headwinds from inflation, the war in Ukraine and zero-COVID policies in mainland China. After following a trend closer to global figures in 2021, the UAE’s business activity index obviously outperformed in 2022, suggesting that the domestic non-oil sector has been more resilient to external shocks than peak countries.
The improvement in the economy in September was characterized by a stronger physical increase in new business volumes. Despite a slight drop from the nine-month high in August, the rate of expansion of new orders was transparent and faster than the trend observed. Since the survey began in August 2009. The companies surveyed commented on the improvement in market situations as well as the increase in sales through efforts to keep costs affordable for customers.
However, strong visitor demand and delays in allocations meant that corporations continued to face capacity constraints, resulting in a slight backlog of open orders. Capacity constraints have now been observed over the past 15 months, indicating that businesses are struggling to adapt to demand. with production levels.
A positive result of this pressure on capacity has been increased recruitment activity. Data from August and September showed two of the fastest increases in employment at UAE non-oil corporations in more than five years, indicating a preference through corporations to rebuild new jobs. elevate.
The survey’s signals on value pressures also imply a much calmer situation for UAE companies compared to global trends. Figure 3 shows input value indices domestically and internationally, noting that input rate inflation in the UAE’s non-oil sector has remained down. than the global average of 2021 and 2022 so far. In fact, August data showed a further decline in trade spending, helped by a slowdown in fuel prices, while September data showed only moderate increases in tariffs.
The moderate rate of input price inflation has helped companies keep prices low (in fact, tariffs in the UAE have fallen in thirteen of the last 14 months according to the PMI), which in turn has encouraged stronger demand. These effects suggest that the ability of UAE companies to escape pressure from senior management over materials, energy and hard work has partly enabled the strong rate of physical expansion seen this year.
That said, the sector may still be exposed to broader impacts and face weaker sales expansion in the coming months if the global situation deteriorates. These considerations are reflected in corporations’ responses to long-term production forecasts. Figure four shows that business confidence has remained subdued in the post-onset era of the COVID-19 pandemic, despite the resumption of activity expansion at an overall pace, with fewer respondents forecasting a build-up in output over the next 12 months compared to the long-term average. the race. In addition, confidence fell to a 17-month low in August, as some corporations feared that global weakness could spread to the domestic economy.
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Editor’s note: Summary bullets for this article were selected through seeking Alpha editors.
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