Text size:

  • Small
  • Normal
  • Large
companies in the UAE are showing more resilience to the euro crisis. Ali Haider / EPA
companies in the UAE are showing more resilience to the euro crisis. Ali Haider / EPA

Euro crisis ripples felt in Middle East

Shockwaves from the euro zone economic crisis are hitting the GCC as new export orders for UAE companies fell last month and business growth in Saudi Arabia faltered.

Shock waves from the euro-zone economic crisis are hitting the GCC as new export orders for UAE companies fall and business growth in Saudi Arabia falters.

Export orders in the UAE's private sector dropped at their steepest in more than two years last month, according to data from HSBC's Purchasing Managers' Index (PMI).

Overall growth held firm, however, with the headline reading rising from 53.2 in June to 53.4.

Saudi Arabia's headline score slid by 1.6 percentage points to 58, the second monthly fall in a row. Both readings are still above the 50 mark separating growth from contraction.

Seasonal factors and Ramadan may account for some of the weaker data, experts say. But HSBC economists believe the impact of the euro-zone crisis is playing a part, too.

"The UAE is vulnerable," said Liz Martins, a senior economist at HSBC in the Middle East. "New export orders held up very well in the first half of the year but we always said it was vulnerable to global conditions and the problems in the euro zone."

Continuing troubles in the European single currency are already buffeting other economies around the world by sapping demand for exports and souring business sentiment.

China's manufacturing sector shrank for a ninth straight month last month, HSBC's PMI survey shows.

Similar data reveal the euro zone's private sector is also performing below the growth threshold.

In comparison, companies in the UAE and Saudi Arabia are showing more resilience.

While employers in the euro zone are laying off staff, UAE companies are still hiring. Last month, employment rose at its sharpest since April last year, recording a seventh consecutive monthly gain.

Strong demand at home helped to drive new order volumes for UAE firms, the survey showed.

But although export sales also rose again, the rise was the weakest since June 2010. Companies surveyed said securing foreign buyers was becoming increasingly tough because of a trickier business environment abroad. The drop in new export orders was the sharpest since the survey began.

Saudi Arabia's economy has been buoyed by high levels of public spending. Last year, the kingdom unveiled a 24 per cent rise in state spending, including a two-month bonus for public-sector workers and transfers to banks supporting small and medium enterprises.

"With output, new orders and stock purchases all weakening, the survey paints a clear picture of a non-oil economy decelerating after a strong nine-month run and suggests that the weaker global environment may have begun to weigh," Simon Williams, the HSBC chief economist in the Middle East, and Ms Martins wrote in a research note.

Other data released yesterday also pointed to uneven conditions within the UAE economy.

Bank loans rose 1.5 per cent in June from the month earlier to Dh1.1 trillion (US$299.48 billion), according to data from the Central Bank. Although the rate of growth is stronger than it has been in recent months, it is still slower than in other parts of the GCC.

But deposits slid by 1.6 per cent to Dh1.11tn over the same period, the third month running a decline has been reported. The figures meant banks' loan to deposit ratio had reached 99 per cent, a level that potentially kept a lid on banks' appetite to lend, said Ms Martins.

Credit growth was a key catalyst in the economy's rapid growth before the global financial crisis of 2008.

tarnold@thenational.ae

Back to the top

More articles


Editor's Picks

 Cityscape Abu Dhabi 2014 will run until April 24, 2014. Fatima Al Marzooqi / The National.

In pictures: Cityscape Abu Dhabi 2014 opens
at Adnec

Key developments and master plans are being unveiled at this year’s property exhibition in the capital.

 Marina Square apartments Reem Island: Q1 2% rise. Studio - Dh65-68,000. 1BR - Dh75-95,000. 2BR - Dh110-145,000. 3BR - Dh170-190,000. Q1 2013-Q1 2014 no change. Sammy Dallal / The National

In pictures: Where Abu Dhabi rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Abu Dhabi have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Designed by London-based Thomas Heatherwick, founder of Heatherwick studio, the park will feature an outdoor cinema, an organic garden, picnic areas and cafes and restaurants. Photo courtesy Salama bint Hamdan Al Nahyan Foundation

Futuristic Abu Dhabi park to be built in the desert shade

Spread over 125,000 square metres, Al Fayah Park, on Airport Road, will be covered by a sand-coloured canopy, 20 metres high, with the appearance of cracked desert land from above.

 Room with a view from one of the 21 duplex penthouses located in the Gate Towers sky-bridge. The sports courts and swimming pools can be seen below. Courtesy Alda

In pictures: Aldar’s Gate Towers Penthouse Collection on Reem Island

Aldar launched its Gate Towers Penthouse Collection at Cityscape Abu Dhabi. The launch features 21 penthouses spanning the skybridge, with each having a private indoor pool and incredible views.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National