Complex Made Simple

UAE and Saudi non-oil growth sluggish in December, employment suffers

Sector cools-off on the back of slower rises in output, new work and employment

Barely a day after the human resource consultancy Mercer revealed that the rapid decline in oil prices is having a significant impact on the growth plans for businesses in the Middle East, a new survey finds in the non-oil sector witnessed in Q4 of 2015 the worst growth rate in the last few years.

The Emirates NBD survey for December showed that the business conditions in the UAE were improving at the slowest rate in 40 months on the back of slower rises in output, new work and employment.

In Saudi Arabia, the sector recorded the weakest pace in the survey’s history with the rate of hiring easing to near-stagnation at the end of the fourth quarter.

Easing growth

The Emirates NBD UAE Purchasing Managers’ Index (PMI) fell to 53.3 in December from 54.5 in the previous month, the lowest since August 2012.

“The PMI data points to weaker domestic and external demand in Q4 2015, which is reflected in lower readings for new orders, employment, output and the backlogs of work. Indeed, for 2015 as a whole, the average PMI was lower than for 2014, signalling slower – but positive – growth in the non-oil private sector,” says Khatija Haque, Head of MENA Research at Emirates NBD.

The Emirates NBD Saudi Arabia PMI dropped from 56.3 in November to 54.4 in December, making the last quarter the weakest for growth (55.4) in the survey’s history.

Employment stagnant?

The survey shows that employment in the UAE rose only modestly in December, while the rate of hiring in Saudi eased to near-stagnation at the end of the fourth quarter to become the weakest in the 21 months. Al least 97 per cent of the respondents in the survey said they saw no change in employment.

Mercer Middle East’s 2015 Total Remuneration Survey Results, released on January 6, argued that the drop in oil prices, the struggling financial market and regional political volatility will trigger a decline in salary increment in the current year.

It says the fall in petro-dollar income that led to cuts in government spending in the past three to six months has compounded the situation, which is likely to prompt companies in the UAE to offer a pay hike of 4.9 per cent in 2016, a figure that fell below five per cent for the first time in five years.

Meanwhile, firms in Saudi Arabia – the country worst hit by the sharp decline in oil prices – project an increment of nearly five per cent, which is “much lower than the traditional six per cent seen in the past few years,” says the survey.

The Mercer study also forecasts that the region will see a decline in hiring in the current year as companies are expected to show fiscal prudence. Only 57 per cent of the organisations surveyed in the UAE and Qatar are planning to increase headcount, as opposed to 71 per cent in a similar survey a year ago. In Saudi Arabia, the decline was from 79 per cent to 66 per cent.