UAE’s non-oil sector continues ‘robust’ growth in January: S&P Global
Price pressures eased, with input costs rising at their slowest rate in 13 months
Non-oil companies raised their selling prices for the first time in four months
Updated 05 February 2025
Nirmal Narayanan
RIYADH: The UAE’s non-oil economy maintained steady growth in January, driven by a rise in new orders, ‘favorable market conditions,’ and easing cost pressures, according to S&P Global.
The Emirates’ Purchasing Managers’ Index stood at 55, slightly down from December’s nine-month high of 55.4.
A PMI reading above 50 indicates growth in the non-oil sector, while a below 50 signals contraction.
The sustained expansion of non-oil business activity across the Middle East, including the UAE, highlights the region’s economic diversification efforts. Saudi Arabia posted a PMI of 60.5 in January, its highest level in a decade. Kuwait recorded a PMI of 53.4, followed by Egypt at 50.7, and Qatar at 50.2.
“The UAE PMI signalled another good month for the non-oil private sector in January, with the headline figure falling only slightly from December’s nine-month high,” said David Owen, senior economist at S&P Global Market Intelligence.
He added: “Robust expansions in activity and new business, as well as lower input cost inflation, suggest the economy is in a healthy position.”
S&P Global said non-oil businesses in the UAE experienced a sharp rise in sales volume, primarily driven by strong domestic demand.
Price pressures also eased, with input costs rising at their slowest rate in 13 months. The slowdown in inflation enabled firms to increase their purchases of inputs at the start of the year.
The PMI survey said favorable market conditions and strong client relationships led to faster delivery times among UAE non-oil businesses in January.
However, companies only recorded a modest increase in staff numbers, though the pace of hiring was the fastest since August.
“A persistently low rate of employment growth suggests that firms are lacking the ability to hire in order to tackle backlog issues,” said Owen. “Input resources similarly remain weak, which seems to be aggravating capacity pressures as work-in-hand rose at the quickest pace in eight months in January.”
Despite the positive trends, surveyed firms were less optimistic about their future outlook, with only 9 percent expecting growth over the next 12 months.
According to these firms, intense competition in the UAE’s non-oil sector was a key factor in dampening confidence.
“The broad decline in business confidence over the past few months will therefore be a surprise to some. Notably, total confidence was at its lowest level since December 2022,” said Owen.
He added: “Strong competition and cash flow concerns arising from heavy backlogs have appeared to sow doubt among firms that they can continue to boost their revenues, underlining efforts to reduce the gap between output and input prices.”
The survey said continued capacity strain was due to heightened demand and administrative challenges, such as slow client payments.
The rate of backlog accumulation accelerated to its fastest pace in eight months, it added.
Due to strong demand pressures, non-oil companies in the UAE raised their selling prices for the first time in four months.
S&P Global said business conditions in Dubai’s non-hydrocarbon sector remained promising, with the emirate’s PMI reaching 55.3 — slightly below December’s nine-month high of 55.5.
Non-oil firms in Dubai saw robust activity expansion in response to greater new business inflows.
Cost pressures also eased, with input price inflation slipping to a three-month low.
Employment and inventory levels saw fractional increases, reflecting a subdued outlook for future business activity.
Regarding future expectations, business confidence in Dubai’s non-oil sector dropped to its lowest level in over four years.
KARACHI: Analysts, investors and key business chambers on Wednesday broadly welcomed Pakistan’s federal budget for 2025-26 as a “balanced” attempt at fiscal consolidation and economic stimulus, though they raised concerns about the achievability of the government’s ambitious growth target of 4.2 percent and heavy reliance on existing taxpayers.
Presenting the federal budget on Tuesday, the government announced a range of tax reforms, spending priorities, and incentives aimed at maintaining its ongoing $7 billion International Monetary Fund (IMF) loan program while also trying to revive investor sentiment and ease pressure on the salaried class.
“The budget announced by the government yesterday [Tuesday] was pretty much in line with what we were expecting, a balanced budget,” said Sana Tawfik, head of research at Arif Habib Ltd, a major Pakistani financial services company.
“The government tried to ensure that the reforms being undertaken currently are on track and Pakistan continues with the fiscal consolidation phase.”
Tawfik was pointing to several key ongoing fiscal and structural reforms that align with Pakistan’s commitments under the IMF program and broader efforts to stabilize the economy.
These include fiscal consolidation through broadening the tax base, rationalizing subsidies, and phasing out tax exemptions; revenue mobilization though increased taxation on interest income, a phased reduction in the super tax and the removal of certain tax exemptions to improve revenue collection; and debt rationalization by managing debt servicing costs, likely by shifting to more concessional financing and restructuring high-cost debt.
While presenting the budget, the government also maintained it would continue its focus on providing relief to the salaried class and try to strike a balance between austerity with social protections.
This handout photograph taken on June 10, 2025, and released by Pakistan's National Assembly shows Finance Minister Muhammad Aurangzeb presenting the 2025–26 fiscal budget at the Parliament House in Islamabad. (AFP)
Tawfik agreed that the government had attempted to strike such a balance between providing relief and raising revenue, citing relief measures for the salaried class in the budget and the phased reduction in super tax.
“The government tried to make sure that we continue with the reforms that we have undertaken in the recent past, while ensuring that we meet the targets set for the upcoming fiscal year,” Tawfik said.
UNREALISTIC GROWTH TARGET?
However, Tawfik was skeptical of the government’s 4.2 percent GDP growth target, calling it “unrealistic” in the current economic context.
“Agriculture has been underperforming, and industries have not been performing due to the high cost of doing business. While we have seen interest rates coming down, agriculture would be the key sector to look forward to,” she said.
Arif Habib Ltd. has forecast GDP growth of around 3.6 percent for FY26, below the government’s target.
Tawfik also noted that while the government had projected inflation at 7.5 percent, her team expected it to be slightly lower, around 6 percent to 6.5 percent, although risks remained from global commodity prices, exchange rate pressures and the fading base effect.
She also flagged a projected current account deficit for FY26, in contrast to a surplus of $1.5 billion expected this fiscal year, citing pent-up demand and increased imports.
Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., echoed the sentiment that the budget was more “measured” compared to previous years.
“In the last two years, we’ve seen very strict budgets. This time, the government has been a little lenient. We’ve seen reform measures but also some relaxations,” Ghani said.
He pointed to tax relief for the salaried class and incentives for the construction sector, though he noted that the Public Sector Development Programme (PSDP) allocation had decreased.
Corporate employees watching television screens as Pakistan Finance Minister Muhammad Aurangzeb presents Pakistan’s $62 billion federal budget for fiscal year 2025–26, in Islamabad on June 10, 2025. (APP)
“There are many allied industries that benefit when we see measures taken for construction,” he said, while noting a less favorable outcome for the auto sector.
Ghani acknowledged the government’s target of a 2.4 percent primary surplus as “optimistic,” but achievable, and described the overall budget as “laying the groundwork” for sustained economic growth.
On the 4.2 percent GDP target, he noted:
“It’s an optimistic target… but with interest rates coming down, we hopefully will see contribution from [agriculture and industrial] segments, and we can get closer to the target.”
STRONG SUPPORT FROM EQUITY MARKETS
While the budget drew applause for investor-friendly policies and efforts toward macroeconomic stability, analysts cautioned that delivery on ambitious fiscal and growth targets remained key to sustaining momentum.
The stock market, however, responded positively from the opening bell.
“As soon as the market started today [Wednesday], it rallied close to 1,400 points,” Ghani said.
“We are in an IMF program and we’re seeing a decent budget this time. All of these things point to the fact that the market is going to reach new heights in the coming months.”
Indeed, despite macroeconomic challenges, the budget drew strong support from equity markets.
“Measures we have seen so far are broadly positive for the stock market,” said Tawfik. “The government kept capital gains tax and dividend income tax unchanged, which the market had feared would be increased.”
Sector-specific measures were seen as favorable for cement, steel, and textile sectors, particularly with subsidies for low-cost housing and removal of sales tax exemptions for certain regions, which levels the playing field for local manufacturers.
“Intraday today, market has gone north of 124,000 points, and we have seen an intraday surge of 2,000 points,” Tawfik said.
DIVIDED BUSINESS COMMUNITY
The reaction from Pakistan’s business chambers, however, was more mixed.
Both the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the Karachi Chamber of Commerce and Industry (KCCI), warned that unless structural reforms were implemented and energy costs reduced, the budget may not succeed in spurring industrialization or export growth.
The FPCCI welcomed certain relief measures, particularly for the salaried class and property sector, but flagged concerns about revenue expectations.
“We welcome steps to end harassment of taxpayers,” said Atif Ikram Sheikh, President FPCCI, noting the simplified tax return form as a positive step.
However, he added: “The increase in tax collection target by Rs2,500 billion ($8.8 billion) is unrealistic.”
The FPCCI also expressed disappointment over the absence of support packages for key sectors such as IT, minerals, fishing, and e-commerce.
People walk past the Karachi Chamber of Commerce & Industry building in Karachi on May 4, 2024. (AN Photo/File)
The KCCI, by contrast, issued a harsh critique of the budget, calling it disconnected from ground realities.
“This is a camouflage budget,” said Zubair Motiwala, Chairman of the Businessmen Group (BMG) at KCCI. “There is no meaningful relief for the business community or the common man. Instead of reforms to expand the tax base, the government is squeezing existing taxpayers.”
KCCI President Muhammad Jawed Bilwani added:
“Electricity bills are unaffordable, interest rates are high, and there’s no relief for the industrial sector. Without addressing the cost of doing business, you cannot expect growth or job creation.”
KARACHI: Federal Minister for Finance and Revenue Muhammad Aurangzeb on Wednesday underscored the significance of sweeping tariff reforms built into the federal budget, calling them a structural economic shift aimed at making exports more competitive and lowering the cost of importing raw materials to support export-led growth.
The minister highlighted the development during a post-budget press conference after presenting the finance bill in the National Assembly a day earlier. The proposed federal budget for FY2025-26 includes a total outlay of Rs17.57 trillion ($62 billion), while promising a 4.2% growth target and a reduction in the fiscal deficit to 3.9% of GDP.
Aurangzeb told journalists in Islamabad the government had removed additional customs duties on 4,000 out of 7,000 total tariff lines and reduced base customs duties on 2,700 tariff lines. Of these, 2,000 tariff lines are directly linked to raw materials and intermediate goods used by exporters.
“This is a big reform that has not been done over the last 30 years,” he said, adding the objective was to lower production costs for exporters and enable them to better compete in international markets.
“We are going to fundamentally change the DNA of the economy so that when we go toward growth, we don’t get into a dollar situation, we don’t get into a balance of payments problem,” he said. “We can continue to grow at a certain pace, which is export-led.”
Defending the reforms against criticism that they may lower revenue, the minister argued the long-term gains for the export sector outweigh short-term fiscal concerns.
“If we want an export-led economy, these are the steps we must take,” he added.
Aurangzeb also emphasized new legislation and enforcement tools, saying they were going to be key in plugging leaks and ensuring compliance.
“We have laws and taxes,” he said, “but without enforcement, they don’t work — and that’s what we’re focused on this year.”
Egypt allocates Red Sea land for issuing bonds and lowering debt
174 square km plot allocated on Red Sea coast to finance ministry
Updated 11 June 2025
Reuters
CAIRO: Egypt has allocated a 174 square km plot on the Red Sea coast to the finance ministry for use in Islamic bond issuances and in efforts to lower the country’s public debt, the official gazette said on Tuesday.
The gazette did not elaborate on how the land would be used, but Egypt, which has been mired in a slow-burning economic crisis, signed a $35 billion deal with the UAE early last year to develop a 170-square-km tract along the Mediterranean coast.
Since then, Egypt has been seeking similar large-scale investments as it tries to overcome the economic crisis.
It has been in talks with Saudi Arabia, Qatar, and Kuwait in a bid to attract major investments, according to investment bankers and news reports.
In tandem, Egypt also plans to issue $2 billion in sukuks, or Islamic bonds, in 2025, Finance Minister Ahmed Kouchouk told Reuters in April.
Abu Dhabi expects more rapid growth for its financial center
New operating licenses increased 67% in the first quarter
Number of firms registered in the center rose by 32% last year
Updated 11 June 2025
Reuters
LONDON: The rush of financial firms setting up in Abu Dhabi to tap the emirate’s wealth funds and Middle East markets will continue at pace, the official in charge of expanding its financial hub has predicted.
Abu Dhabi, which holds 90 percent of the UAE’s oil reserves, has accelerated efforts to diversify its economy, leaning on its vast sovereign funds that together manage almost $2 trillion of capital.
Abu Dhabi Global Markets still lags Dubai, but the number of firms registered in the center rose by 32 percent last year, and the amount of assets managed by firms there grew 245 percent, as the likes of BlackRock, Morgan Stanley, AXA, PGIM and hedge fund Marshall Wace all set up or registered funds there.
Earlier on Tuesday, Harrison Street, a US firm focused on alternative real estate assets with about $56 billion in assets under management, said it was opening an office in Abu Dhabi.
The center reported last week that new operating licenses increased 67 percent in the first quarter of this year, taking the total number of firms there past 2,380.
“We still have very strong growth,” ADGM’s Chief Market Development Officer, Arvind Ramamurthy said, noting that the pipeline of new firms looked strong for the rest of the year, but refrained from giving a forecast for asset growth.
“Will it be 245 percent again this year? I wish. Let’s see,” he said in an interview late on Monday.
Firms from Japan, India, and China are also setting up in growing numbers, including asset managers and financial institutions, as well as crypto and artificial intelligence firms, Ramamurthy said, providing no further details.
With cryptocurrency regulations in place since 2018, Abu Dhabi has become a major center for such investment, with sector heavyweights such as Circle and Coinbase represented there, while Abu Dhabi-backed investment group MGX has recently invested $2 billion worth of crypto tokens — issued by US President Donald Trump’s World Liberty Financial venture — in the world’s biggest crypto exchange, Binance.
Oil demand growth to continue, no peak in sight, OPEC Secretary General says
Updated 11 June 2025
Reuters
CALGARY: Oil demand growth will remain robust over the next two and a half decades as the world population grows, OPEC Secretary General Haitham Al-Ghais has said.
The organization expects a 24 percent increase in the world’s energy needs between now and 2050, with oil demand surpassing 120 million barrels per day over that time period.
That estimate is in line with the group’s 2024 World Oil Outlook.
“There is no peak in oil demand on the horizon,” Al-Ghais said, speaking at the Global Energy Show in Calgary, Alberta.
He said that OPEC admired what Canada’s oil industry has done to increase its oil output in recent years.
OPEC is unwinding its output cuts at a faster pace than originally anticipated, lifting production by 411,000 barrels per day for May, June and July.
The increases, along with concerns that US President Donald Trump’s trade war will weaken the global economy, have pressured oil prices in recent months.
The US Energy Information Administration said it expected Brent oil prices to fall near $60 a barrel by the end of the year and average $59 a barrel next year, hitting US oil production.
Al-Ghais also said OPEC welcomed recent pushback against what he referred to as unrealistic climate goals, stressing the need to reduce emissions but not pick and choose between energy sources.
