UAE non-oil growth subdued as headwinds buffet Kuwait and Egypt

• War disruption constrains output
• Supply-chain conditions worsen
• Egypt faces inflation pressure

UAE non-oil growth stayed subdued in May as regional tensions and supply disruption constrained output, S&P Global said, while the sector also faced headwinds in Kuwait and Egypt.

The UAE’s seasonally adjusted purchasing managers’ index rose to 52.6 last month from April’s 52.1, signalling that operating conditions improved modestly. A PMI score above 50 represents growth, while a reading below that level indicates contraction.

Emirati supply-chain conditions deteriorated, with delivery times lengthening for the second time in three months due to restrictions in the Strait of Hormuz.

Export orders declined, driven by shipping disruption and continued uncertainty about how long the conflict will last, said David Owen, principal economist at S&P Global Market Intelligence.

Businesses view these challenges as temporary and expect growth to bounce back quickly, he said.

In Kuwait, companies continued to face challenging conditions due to the war, despite some improvement in May, S&P Global said. The country’s headline PMI increased to a three-month high of 47.2, from 46.3 in April.

Output and new orders declined further, due to the effects of the conflict and competitive pressures.

Andrew Harker, economics director at S&P Global Market Intelligence, said an improvement in business confidence raises hopes that the non-oil private sector will return to expansionary territory in the coming months.

Egypt inflation worries

Non-oil companies in Egypt faced another contraction in operating conditions in May as growing inflationary pressures curbed demand, according to S&P Global.

The PMI rose to 47.1, from 46.6 in April.

New orders contracted for a fifth consecutive month amid cost concerns, driven by higher diesel and electricity prices, currency weakness and wage pressures. In addition, job cuts accelerated to their fastest pace since June 2020.

The May PMI findings added to signs that the Middle East conflict is likely to depress second-quarter GDP growth in Egypt, Owen said.

Further reading:

• Non-oil growth adds to rising UAE GDP
• Saudi oil exports rise 37% in March
• Saudi Arabia overtakes UAE on the GCC’s road to renewables