6 days ago
Dubai's July rebound underscores UAE's strong non‑oil growth path
Dubai's non‑oil private sector regained momentum in July, reinforcing the emirate's position as a growth leader in the UAE's diversified economy.
The Dubai Purchasing Managers' Index (PMI) climbed to 53.5 from a 45‑month low of 51.8 in June, signalling a solid improvement in operating conditions. The rebound was driven by stronger demand, rising client enquiries and a marked pick‑up in sales volumes, in sharp contrast to the overall UAE trend where growth slowed.
Dubai's resilience contrasted with the UAE's broader non‑oil private sector performance, which softened to its weakest pace in more than four years. The nationwide PMI fell from 53.5 in June to 52.9 in July, still comfortably above the 50‑point threshold that separates growth from contraction but pointing to slower expansion than the long‑term trend. The slowdown was linked to a softer rise in new business, regional tensions affecting client sentiment, weaker tourism flows and global trade disruptions.
Survey participants attributed Dubai's upturn to better business conditions, increased marketing activity and greater consumer confidence. Firms expanded output at the fastest rate in five months, continued hiring, and built up inventories to meet anticipated demand. Supplier delivery times improved modestly, despite some shipping disruptions, while inflationary pressures remained contained. Selling prices rose at the slowest pace in eight months, giving businesses greater flexibility in securing orders.
Across the UAE, hiring and purchasing activity eased in line with moderating sales growth, and job creation slowed to its weakest in four months. Backlogs of work rose at the fastest rate since January as companies struggled to complete projects on time. Some firms cut back on purchases, leading to a fall in inventories for the third time in five months. While delivery times improved overall, customs delays and rising demand for certain materials slowed the pace of progress.
Cost pressures also returned. After cooling to a near two‑year low in June, input costs accelerated in July, with higher shipping fees, raw material costs and wages pushing overall inflation to its fastest rate since April. Many companies responded with modest price increases to protect margins. Still, most businesses remained optimistic about the year ahead, expecting a rebound in demand if geopolitical risks ease.
David Owen, senior economist at S&P Global Market Intelligence, noted that business conditions were still improving despite the weaker pace of growth. He attributed much of the slowdown to temporary factors such as heightened tensions between Iran and Israel and intensifying competition in some markets. 'Should regional tensions ease, we may see a recovery in sales growth in the coming months,' he said, adding that the UAE's price environment remains supportive for demand.
This short‑term moderation comes against a backdrop of strong medium‑term prospects. The Central Bank of the UAE (CBUAE) projects that the national economy will grow by 4.4 per cent in 2025, accelerating to 5.4 per cent in 2026. In its 2024 Financial Stability Report, the central bank described a buoyant financial system, underpinned by strong capital and liquidity buffers, prudent regulation and a diversified growth base.
The UAE's real GDP expanded by four per cent in 2024, with non‑oil sectors leading the charge at around five per cent growth, supported by finance, tourism, logistics and trade. Oil output grew by one per cent but is expected to rebound sharply as Opec+ production limits ease, with the hydrocarbon sector forecast to grow 4.1 per cent in 2025 and 8.1 per cent in 2026. Non‑oil sectors are expected to sustain a healthy 4.5 per cent growth rate over both years, driven by public investment, diversification strategies and private‑sector innovation.
These forecasts align with independent assessments. The International Monetary Fund expects UAE GDP to rise by about four per cent in 2025 and five per cent in 2026, while the World Bank sees growth of 4.6 per cent in 2025 and 4.9 per cent in both 2026 and 2027. The World Bank also predicts the UAE's non‑oil economy will expand by 4.9 per cent next year, well above the GCC average of 3.2 per cent.
CBUAE Governor Khaled Mohamed Balama emphasised that prudent economic management has positioned the UAE to maintain strong growth despite a volatile global backdrop. 'Robust fundamentals and proactive regulatory frameworks have helped insulate the economy from global risks while sustaining growth momentum,' he said. The central bank's projections suggest continued strength in investment inflows, healthy job creation — with employment expected to rise 3.3 per cent in 2025 — and unemployment remaining low at about 2.1 per cent.
Financial sector resilience remains a core pillar of this outlook. Stress tests show that UAE banks can withstand adverse scenarios while maintaining strong capital ratios and lending capacity. The insurance sector expanded strongly in 2024, with written premiums up 21.4 per cent to Dh64.8 billion, while finance companies and money exchanges retained solid balance sheets.
Economists say that Dubai's July rebound illustrates the agility and adaptability of the UAE's non‑oil economy, even in a month when national indicators softened. The combination of resilient domestic demand, robust fiscal and financial buffers, and a clear policy direction provides a strong foundation for sustained growth.
While the July PMI suggests a temporary easing in the pace of non‑oil growth nationwide, Dubai's renewed momentum, coupled with the central bank's upbeat forecasts, points to a UAE economy firmly on track for broad‑based expansion through 2026, according to analysts.
