The UAE’s non-oil private sector saw solid performance in 2025, as the S&P Global UAE Purchasing Managers’ Index measured 55.0 in January. This reading, while lower than December’s nine-month peak of 55.4, shows continued growth in the economy.
More than 25% of businesses reported better activity at the year’s start, powered by local demand as exports slowed. The expansion builds on the UAE’s push to boost non-oil trade, which has become a central driver of economic progress.
This trend underscores the private sector’s growing role in diversifying revenue streams beyond traditional oil income.
Price Adjustments and Cost Management
Companies raised prices in January for the first time since September, though modestly.
Such moves helped offset climbing transport and machinery costs, while overall input expenses fell to their lowest in 13 months. The easing cost pressures allowed firms to buy more supplies, fostering a balanced approach to financial management and growth planning.
Local firms have adapted their pricing strategies to maintain competitiveness while protecting their margins. These adjustments come as businesses navigate changing market conditions and seek to optimize their operations for long-term sustainability.
Operational Challenges Amid Growing Demand
Businesses still struggled with mounting work backlogs amid high demand and payment delays. The pace of unfinished work reached an eight-month high, even as hiring rose to its fastest rate since August 2024. Companies chose to use materials for current orders instead of building stock, leading to small inventory gains.
These operational hurdles haven’t dampened the sector’s underlying strength. Firms continue to process orders and expand their workforce, albeit at a measured pace. The careful management of resources reflects a pragmatic approach to business expansion in the current economic climate.
Dubai Leads Regional Business Growth
Dubai’s non-oil sector maintained its edge with a reading of 55.3, slightly above the UAE figure. The emirate saw more new business and bigger customer bases, helping sustain revenue growth across its private sector. This performance aligns with Dubai’s position as a hub for regional trade and commerce.
The emirate’s businesses have shown particular resilience in adapting to market changes. Their success in attracting new customers while maintaining existing relationships has created a stable foundation for continued expansion.
Mixed Outlook Despite Current Success
On the flipside, business optimism fell to its lowest since December 2022. Just 9% of surveyed firms expected growth in the coming year, with many citing market competition as a limiting factor. This cautious outlook contrasts with current performance indicators.
David Owen, Senior Economist at S&P Global Market Intelligence, explained this contrast: “Robust expansions in activity and new business, as well as lower input cost inflation, suggest the economy is in a healthy position. The broad decline in business confidence over the past few months will therefore be a surprise to some.”
Gulf Region Shows Broader Economic Shift
The UAE’s ongoing non-oil expansion mirrors wider changes across the Gulf. Saudi Arabia’s reading reached 60.5 in January, with Kuwait at 53.4, Qatar at 50.2, and Egypt at 50.7. These figures show how regional economies continue to diversify beyond oil, creating new paths for GDP advancement through broader economic activity.
The collective movement toward economic diversification represents a fundamental change in the region’s business landscape.
As Gulf nations reduce their dependence on oil exports, they’re creating new opportunities for sustainable economic development and cross-border collaboration.
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