Business activity in the non-oil private sector of the two largest economies in the Arab world continued to expand in March, following the launch of the Covid-19 vaccine.
IHS Markit’s purchasing managers’ index in Saudi Arabia was 53.3 in March, down from 53.9 in February, a slightly softer, but relatively solid, rise in the economy’s performance. of the non-oil private sector. A reading above a neutral level of 50 indicates economic expansion and below indicates a contraction.
Non-oil companies in the kingdom, the largest economy in the Arab world, continued to experience expansions in production and purchasing, and a stabilization in the number of jobs that helped efforts to reduce pending work.
Despite softer activity in March, “we should see an improvement in business activity reflected in official data for the first quarter of 2021,” said David Owen, an economist at IHS Markit.
The kingdom’s employment figures were largely stable in the latest survey, which pointed to one of the best labor market results since the period before the Covid-19 outbreak. The increase in production encouraged companies to expand purchases, although the slower growth of new orders and the efforts of some companies to decrease stocks meant that purchasing activity only increased modestly.
IHS Markit’s PMI in the UAE jumped to 52.6 in March, from 50.6 in February, the strongest rise in 20 months and the fourth consecutive month of expansion driven by new business inflows and a strong recovery in the construction sector.
The main engine of growth of the second largest economy in the region was the production index, which recorded its highest reading for more than a year and a half and noted a sharp increase in non-oil activity, as demand soared to the back of the vaccine registry that increased business confidence and spending. Efforts to restart construction were also a key factor for growth, according to the survey. Respondents noted the resumption of old projects and the increase in new work.
“Improving construction activity acted as a much-needed boost for the UAE’s non-oil economy in March, with the PMI gaining ground and recording its highest reading since mid-2019,” said Owen. “Business confidence improved to a maximum of eight months, with vaccine optimism boosting confidence in future activities.”
The hope that pandemic-related restrictions will relax further in the coming months contributed to a further improvement in business sentiment.
Both Saudi Arabia and the United Arab Emirates have opened up their economies, easing some restrictions on companies as they develop mass inoculation programs to curb the pandemic.
Improving construction activity acted as a much-needed boost for the UAE’s non-oil economy in March, with the PMI gaining ground and recording its highest reading since mid-2019.
David Owen, economist at IHS Markit
Mass detection of the public and widespread vaccination continue to be key to the fight against the pandemic. The UAE has administered more than 8.6 million doses of vaccine, enough to vaccinate nearly 40 percent of the country’s population, according to the Bloomberg vaccine tracker. The country has conducted 38.5 million tests since the pandemic began last March, which has helped restore confidence in markets and boost business activity.
However, despite the introduction of global vaccination, the world is still facing the second and, in some cases, the third wave of Covid-19 infections that have led to a new blockade in parts of Europe. , Asia and North America. According to Worldometer data, covid-19 infections worldwide have surpassed 131 million, with 2.86 million fatalities as of Monday.
Meanwhile, in Egypt, the Arab world’s third-largest economy, March data signaled a decline in private non-oil business activity as new companies fell for the fourth consecutive month.
The IHS Markit Egypt Purchasing Managers ’Index fell to 48 in March, from 49.3 in February. This resulted in the lowest reading since June 2020 and the fastest recession since the initial impact of the Covid-19 outbreak.
However, the outlook for future business activity was more positive, as companies predicted that economic conditions would improve with further reopening of the economy and the country’s inoculation boost.
“The expansion of the vaccine program to more demographic data played a key role in raising expectations,” said Owen, who added that it could be a sign of improved short-term demand and a recovery in production in the second half of this year.
Updated: April 5, 2021 at 12:50 p.m.