UAE Non-Oil Private Sector Growth Slows Amid Rising Costs and Supply Disruptions

Decline in Non-Oil Sector Growth

The performance of the UAE’s non-oil private sector has shown signs of weakness in April, marking a second consecutive month of decline. The slowdown is attributed to escalating costs and supply chain disruptions caused by ongoing conflicts in the Middle East, particularly since late February. Additionally, a decrease in tourism activity and shipping interruptions have further exacerbated the situation.

The UAE, one of the largest oil producers in the region, is facing challenges despite its plans to enhance the contribution of the non-oil sector to its GDP. The conflict has led to the closure of the Strait of Hormuz, rising energy prices, and supply chain interruptions, alongside Iranian attacks on Gulf states, all contributing to the current economic strain.

Purchasing Managers’ Index Reflects Economic Conditions

According to the Purchasing Managers’ Index (PMI) published by S&P Global, the index fell to 52.1 points in April from 52.9 points in March, indicating the weakest improvement in business conditions since February 2021. This decline reflects a slowdown in new business growth, which has reached its slowest pace in over five years, as consumer spending declines and tourism wanes.

New export orders also saw a significant drop in April, marking the steepest decline since August 2009, excluding the peak period of the COVID-19 pandemic in 2020. These developments are largely a consequence of shipping disruptions linked to the ongoing conflict in the region.

Rising Costs and Employment Challenges

On the cost front, input prices surged at the fastest rate since July 2024, prompting companies to increase selling prices sharply, the most significant rise since June 2011. Businesses are struggling to maintain profit margins, leading to a reduction in production levels compared to earlier in 2026.

To mitigate cost pressures, some companies have resorted to cutting jobs and freezing wages, resulting in the slowest growth in employment seen in 2026 to date, with only slight wage increases reported. Despite these challenges, non-oil companies remain optimistic about future business prospects, with expectations rising to their highest level in three months, supported by strong business opportunities, sales channels, and technological innovation.

Frequently Asked Questions

What factors contributed to the slowdown in the UAE’s non-oil sector?

The slowdown is primarily due to rising costs, supply chain disruptions, and decreased tourism activity.

How did the Purchasing Managers’ Index change in April?

The PMI fell to 52.1 points in April from 52.9 points in March, indicating weaker business conditions.

What are the implications of rising input costs for businesses?

Rising input costs have led companies to increase selling prices sharply, affecting profit margins.

What is the outlook for the UAE’s non-oil sector?

Despite current challenges, businesses express optimism about future growth due to strong opportunities and technological advancements.