UAE Non-Oil Sector Hits Four-Year High

January 5, 2024by Frank Hemle0

Business activity in the United Arab Emirates’ (UAE) non-oil private sector economy hit its highest level in more than four years in December due to substantial rise in output and new orders.

The S&P Global purchasing managers’ index climbed to 57.4 in December, from 57 in November, its highest point since mid-2019, setting it well above the neutral 50 mark that separates growth from contraction.

The United Arab Emirates’ capital, Abu Dhabi, posted third-quarter non-oil gross domestic product (GDP) growth of 7.7%. The emirate registered overall economic growth of 1% in Q3 year on year, according to preliminary estimates released by the Statistics Centre-Abu Dhabi (SCAD) to reach 290.5 billion dirhams ($79.11 billion).

What they’re saying: “Lower production and oil prices this year have weighed on overall growth, but Gulf states have all stepped up efforts to diversify their economies and income sources away from hydrocarbons to plan for more sustainable growth in the long term,” reads a Reuters article.

By the numbers: Abu Dhabi registered 2.8% growth in real GDP over the first nine months of 2023 compared to the same period a year prior and 8.6% growth in non-oil activities.

UAE Central Bank has increased its 2024 growth forecast for the country’s economy to 5.7%.

“While the country’s oil gross domestic product is expected to contract by 3.4% annually this year due to output cuts, ‘as production resumes in 2024,’ oil GDP growth is forecast to rebound to 8.1%, corresponding to an average of 3.2 million barrels per day, the Central Bank said.”

In its latest meeting, the OPEC+ group of oil producers announced voluntary production cuts of 2.2 million barrels per day for the first quarter of 2024. “Unlike previous cuts, this one has been parceled out among the stronger members: Saudi Arabia will cut 500,000 bpd, the UAE 144,000 bpd, Iraq 211,000 bpd, Kuwait 128,000 bpd, and Oman 40,000 bpd. Nigeria, Algeria, Angola and others have effectively been contributing additional cuts for months already,” reads another The National article.

However, while the UAE’s non-oil private sector economy has seen significant growth, payment delays and issues in credit collections have been on the rise, indicating potential challenges in cash flow management and customer relationships.

Customers in the United Arab Emirates have averaged 30 days beyond terms, with 75% of credit professionals saying payment delays have increased, per the November FCIB Credit & Collections Survey. The most common causes for payment delays are customer payment policy (75%), unwillingness to pay (50%), supply chain or shipping disputes (50%), cashflow issues (50%) and cultural norms and customs (50%).

What FCIB Credit and Collections Survey respondents are saying:

  • “With continued global inflation, war in Ukraine and high interest, you need to know your true legal customer to prevent fraud and keep your A/R secured.”
  • “Start early building a relationship with your customer and include your salesperson.”
  • “It is important to know customer’s payment process to avoid misunderstandings or delays due to administrative issues.”

The December Credit & Collections Survey is now open. It covers Chile, Egypt, Italy and the United States.

 

Jamilex Gotay, editorial associate

Frank Hemle

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