The UAE’s non-oil private sector continued to expand in March despite regional conflict disrupting supply chains and raising costs, underlining the economy’s structural resilience and the strength of domestic demand even as business confidence softened.
The seasonally adjusted Purchasing Managers’ Index compiled by S&P Global slipped to 52.9 in March from 55.0 in February, remaining comfortably above the neutral 50 mark that separates growth from contraction. Although the reading was the joint-lowest since mid-2021, it still signalled a solid improvement in operating conditions across the non-oil economy.
The moderation largely reflected the impact of the Middle East conflict on logistics routes, tourism flows and input costs, particularly after shipping disruptions through the Strait of Hormuz lengthened delivery times and increased freight and insurance expenses. Even so, companies reported steady project pipelines and continued inflows of new business, indicating that underlying activity remained firm.
Survey data showed new orders rose for the seventh consecutive month, albeit at a slower pace, while export demand also remained positive. Businesses continued to hire staff to manage rising backlogs, highlighting confidence in medium-term workloads despite near-term uncertainty.
David Owen, senior economist at S&P Global Market Intelligence, said firms were adapting to disruptions while maintaining growth momentum. “Orders books were resilient and output expanded,” he noted, adding that strong demand in technology and construction and government spending programmes continued to underpin confidence.
Dubai’s non-oil private sector also remained in expansion territory. The emirate’s PMI eased to 53.2 in March from 54.6 in February, signalling a slower but still historically solid pace of growth. Businesses reported supply-chain delays and rising costs, yet output and new orders continued to increase, supported by infrastructure activity, digital investment and ongoing project execution.
Across the country, companies reported stronger backlogs of work, suggesting that existing contracts and pending projects will continue to support activity in the coming months even if new orders moderate temporarily.
Cost pressures intensified during March as logistics, fuel, machinery and technology equipment prices rose sharply. Firms responded by increasing selling prices at the fastest pace in nearly 11½ years, reflecting their ability to pass through part of the higher input costs without significantly weakening demand.
Importantly, businesses continued to express optimism about long-term prospects, citing infrastructure spending, technology adoption and diversification initiatives as key growth drivers.
Abu Dhabi’s long-term development strategies and national industrial programmes were repeatedly identified as supportive anchors for future expansion.
International institutions also remain upbeat about the UAE’s economic trajectory.
The International Monetary Fund has said the country’s diversified non-oil economy and strong fiscal buffers continue to position it as one of the region’s most resilient performers, with sustained expansion expected over the medium term.
Similarly, the Central Bank of the UAE has highlighted robust credit growth, infrastructure investment and rising private-sector activity as key factors supporting non-oil momentum despite global uncertainty.
While confidence dipped to a five-year low amid geopolitical risks, companies remained broadly positive about future activity. Many firms pointed to strong domestic demand, expanding technology adoption and government-led investment pipelines as stabilising forces that should help cushion the impact of regional volatility.
Taken together, the latest PMI readings suggest that although geopolitical tensions temporarily slowed growth in March, the UAE’s non-oil sector continues to demonstrate adaptability and resilience — reinforcing expectations that the broader economy will maintain steady expansion through 2026.
