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UAE business growth surges to 20-month high—what’s driving it?

Business activity in the UAE climbed to its highest level in nearly two years this June, signaling strong economic momentum. Meanwhile, Egypt’s purchasing managers’ index (PMI) inched closer to stabilization, offering a glimmer of hope for its struggling economy. The latest data, tracked by S&P Global, highlights diverging trends across the region.

How fast is UAE business activity growing?

The UAE’s PMI rose to 56.9 in June, up from 55.3 in May. This marks the fastest expansion since October 2022. Any reading above 50 indicates growth, and the UAE has now recorded 44 consecutive months in positive territory.

New orders surged, particularly in the non-oil private sector, as companies reported stronger demand both domestically and from international clients. Firms also ramped up hiring, with employment levels rising at the fastest pace in over a year.

What’s behind Egypt’s economic stabilization?

Egypt’s PMI improved to 49.9 in June, just shy of the 50-point mark that separates growth from contraction. While still in negative territory, this is the highest reading since February 2022 and suggests the economy may be turning a corner.

The improvement follows a series of reforms, including a flexible exchange rate and a $8 billion IMF loan agreement. Businesses reported a slight uptick in new orders, though input costs remained high due to inflation and currency fluctuations.

Why this matters for the Gulf

The UAE’s robust growth reinforces its position as a regional business hub. The non-oil sector, which accounts for over 70% of GDP, is expanding at a pace not seen in nearly two years. This could attract more foreign investment, particularly in sectors like tourism, real estate, and logistics.

For Egypt, stabilization—even if fragile—could ease pressure on Gulf economies that have provided financial support. Saudi Arabia and the UAE have injected billions into Egypt in recent years, and a recovering Egyptian economy would reduce the risk of further bailouts.

UAE vs. Egypt: Key PMI metrics for June 2024

What’s next for the UAE and Egypt?

In the UAE, the focus will likely shift to sustaining this growth. Policymakers may introduce measures to further diversify the economy, particularly in high-tech and green energy sectors. The upcoming COP28 legacy projects could also play a role in driving long-term investment.

For Egypt, the challenge remains managing inflation and restoring investor confidence. The IMF’s next review, expected later this year, will be critical in determining whether the country can maintain its fragile economic recovery.

Disclaimer: PMI data reflects business sentiment and may not fully capture economic realities. Always consult financial experts before making investment decisions.

Will the UAE’s growth streak continue, or are headwinds on the horizon? Share your thoughts in the comments.

Read the full details in the original report by Arab News.