Kuwait business activity strengthens, UAE sees slight dip in non-oil growth: S&P Global

06/04/2025 09:05 AST

Kuwait's non-oil private sector continued to gain traction in March, with business conditions improving at a faster pace, while growth in the UAE's non-energy economy moderated slightly, an economy tracker showed.

According to the latest S&P Global Purchasing Managers' Index surveys, Kuwait's PMI rose to 52.3 in March from 51.6 a month earlier, signaling a solid monthly improvement in business activity driven by stronger demand, higher output, and a rebound in hiring.

In contrast, the UAE's PMI slipped to 54 from 55 in February, indicating softer - though still robust - growth across its non-oil economy.

Any PMI reading above 50 signifies an expansion, while a reading below 50 indicates contraction, according to S&P.

The growth of Kuwait's non-oil business sector reflects a broader trend across the Middle East, where countries including Saudi Arabia are actively pursuing economic diversification to reduce their reliance on crude revenues.

Kuwait's non-oil private sector saw a sharper rise in output and new orders in March, while employment returned to growth after a dip in the previous month.

"The latest reading pointed to a solid monthly improvement in the health of the non-oil private sector, and one that was more pronounced than in the previous month," said S&P Global.

The report noted a significant uptick in purchasing activity in Kuwait, driven by stronger demand, new product offerings, and competitive pricing.

New export orders also rose, marking the fastest pace so far this year. Surveyed firms said discounting was the main factor supporting the growth in business activity.

"The tried and tested formula of keeping prices low paid off for firms in Kuwait again in March. Although output prices rose, the pace of inflation was only marginal and clients responded accordingly by committing to new orders," said Andrew Harker, economics director at S&P Global Market Intelligence.

"In fact, both new orders and output rose more quickly than in February," he added.

Although companies raised their selling prices in March after a reduction in the previous month, the rate of inflation remained marginal as firms continued to price competitively to attract customers.

S&P Global also noted that staff costs were unchanged in the third month of 2025, following a slight decline in February.

"There were some reports of firms making conscious efforts to try to keep on top of workloads, with employment and inventories raised accordingly," said Harker, adding: "But given the strength of new order growth, more capacity will likely be needed to try to prevent the sustained accumulation in backlogs of work continuing."

Looking ahead, non-oil companies in Kuwait expressed increased optimism, with business confidence reaching a three-month high in March.

Over 34 percent of survey respondents expected activity to grow, citing the impact of new marketing strategies and the availability of quality products at competitive prices.

UAE growth eases
While the UAE continued to register strong non-oil growth, March marked the third consecutive monthly dip in PMI, with the headline reading falling to its lowest since September 2023.

S&P Global attributed the slowdown to milder demand growth and lingering capacity constraints.

"The UAE PMI signaled another month of robust growth in the non-oil economy in March, although there were some signs that momentum may be slowing. A third consecutive month-on-month softening of new order growth shows that some firms could be encountering challenges in meeting their sales targets," said David Owen, senior economist at S&P Global Market Intelligence.

The UAE's PMI had reached a nine-month high of 55.4 in December. The latest figure marks its lowest level since September.

Survey respondents reported gaining new customers in March, supported by improved demand conditions. However, strong competition and only modest growth in new export orders meant the upturn in sales was the weakest since October.

"The quest to overcome capacity hurdles ramped up in March, as firms purchased inputs in bulk to try and clear their backlogs. The surge in purchasing activity reached its fastest pace since mid-2019, while a decrease in inventories indicated that these new inputs were quickly integrated into operations," said Owen.

He added that some non-oil firms in the UAE are still grappling with backlogs due to widespread delays in customer payments.

S&P Global noted that while business activity in the country's non-oil private sector rose sharply in March, it was still at the slowest pace in four months. Around 27 percent of surveyed firms reported increased activity during the month, while 8 percent saw a decline.

Employment growth remained subdued, marking its weakest pace in nearly three years, with most firms keeping staff numbers unchanged.

"Given the elevated demand levels, this suggests that some firms could be struggling to locate suitable candidates," said Owen.

The report also noted that Dubai's non-oil business conditions improved at a softer rate for the third consecutive month in March. Dubai's PMI dropped to a five-month low of 53.2, down from 54.3 in February and below the overall UAE reading of 54.

Arab News