Saudi Arabia, UAE are gradually ‘de-anchoring’ from oil price movements, according to data

Overview

  • Several factors are contributing to the region’s recovery, including the fact that oil prices are at their highest level in seven years
  • Analysts told reporters that non-oil growth is a crucial driver of the recovery
  • In October, Saudi Arabia’s non-oil private sector grew for the 14th consecutive month, while the UAE had the fastest increase in commercial activity and new orders in nearly two and a half years

Recovery from pandemic

THE UNITED ARAB EMIRATES — DUBAI, United Arab Emirates — The major Gulf economies of Saudi Arabia and the United Arab Emirates are seeing increased business activity. From the consequences of the COVID-19 outbreak and the resulting drop in oil prices early last year, there is a strong recovery with unambiguous optimistic outlooks for non-oil growth.

In October, Saudi Arabia recorded its 14th consecutive month of non-oil private sector growth, with the UAE leading the way. In roughly two and a half years, it was evident in business activity as well as new orders. The output of Saudi Arabia’s non-oil private sector surged at its quickest rate since the end of 2017.

On Wednesday, Khoman told reporters, “There is a strong sense of de-anchoring from oil price changes.” “However, oil prices are at a seven-year high, which has historically signified a relaxation of budget consolidation measures,” he added. He called the traditional strategy of leveraging heavy government spending as a growth driver “the model of the past,” and added that “business activity is firming.”

Factors contributing to the recovery

Several factors are contributing to the region’s recovery, including the fact that oil prices are at their highest level in seven years. In both the UAE and Saudi Arabia, the relaxation of mobility restrictions, the return of travel, and effective vaccination campaigns have all contributed to the present good outlook.

“Yes, the headline PMI rates have fallen, but with this high healthy levels in firm high 50s, it is obvious that the non-oil sector is speedily recovering,” Khoman added.

Dubai rebounding and oil still ranking

According to the Dubai Land Department, the property sector in Dubai has recovered well, with the “biggest third quarter in history” for property sales transaction value. That’s a big difference from early 2020 when the real estate market had dropped more than 25% in five years.

Nonetheless, the encouraging numbers indicate that governments’ efforts to diversify their economy away from hydrocarbons are finding traction.

In a Wednesday report, reporters said, “October’s set of PMIs implies that non-oil industries in the Gulf are concluding the year on a good basis.”

This implies that prices are rising — “in Saudi Arabia, the production price component jumped to its highest level since August last year,” Swanston said. This suggests that inflation will most likely accelerate shortly.

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