UAE Economic Landscape: Challenges, Recovery, and Growth Projections
In January 2024, the UAE’s non-oil business operations experienced a five-month low, with the S&P Global UAE Purchasing Managers’ Index (PMI) dropping from 57.4 in December 2023 to 56.6. The slowdown in job growth and a softer output and new orders contributed to this decline. Despite a significant but slower increase in non-oil output, the growth rate hit its lowest point since August 2023. While robust demand conditions boosted sales and client acquisition, overseas new orders only slightly increased. Businesses reported a marginal rise in the workforce, reflecting optimism amid robust demand and positive business outlooks.
However, the PMI survey revealed concerns about rising supply-chain risks causing delivery delays and increased shipping expenses in January. The disruption from Red Sea attacks had a modest impact on the non-oil sector, with reports of delivery delays and higher shipping costs. Higher material costs and pay increases significantly raised expenses, impacting inflationary pressures. Despite these challenges, companies expressed favorable optimism about the activity picture for 2023.
Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, projected a 5.7% GDP growth in 2024. Efforts to diversify the economy and promote sustainable growth were deemed effective, with non-oil GDP expected to reach 5.9% in 2023 and 4.7% growth in 2024. The UAE’s non-oil foreign trade recorded a substantial increase, reaching AED1.239 trillion in H1 2023, and foreign direct investment inflows amounted to AED83.5 billion in 2022. The PMI’s rise to 57.7 in October 2023 signaled a post-COVID-19 surge, showcasing the country’s resilient economic recovery and commitment to innovative strategies aligned with national principles.