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Regional PMIs- Saudi PMI rises to year high in December

Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 05 January 2021



The UAE’s headline PMI rose back above the 50-level that separates expansion from contraction, coming in at 51.2 in December from 49.5 in November.  While indicating only modest growth, it was the highest reading since August 2019.  Output recovered from the decline in November, while new order growth accelerated slightly, partly due to improving external demand. Input costs were broadly unchanged from November and selling prices were slightly lower. 

The weak-spot in the December survey was employment, which fell for the 12th month in a row as firms continued to focus on keeping costs down.  The survey again highlighted cash flow challenges faced by some firms.  Panellists were also cautious about the outlook over the next 12 months, despite the initial rollout of Covid-19 vaccines in the UAE and in some developed economies. The vast majority of firms surveyed expected no change in their output in twelve months’ time, with only 2% expecting an increase.

The average PMI for Q4 2020 was 50.1, indicating “no change” in business conditions in the UAE and the reading for Q3 was only slightly higher at 50.4. This suggests that the recovery in the private sector after the economy reopened has been insufficient to offset the coronavirus-driven contraction earlier last year.  We retain our estimate of -6.7% contraction in non-oil GDP in the UAE in 2020, and we expect non-oil growth to rebound 3.5% in 2021. Headline GDP growth will likely be lower at 1.9% due to the drag from lower average oil production this year.

UAE PMI survey

Source: IHS Markit, Emirates NBD Research

Saudi Arabia

Saudi Arabia’s PMI rose to 57.0 in December from 54.7 in November, the highest reading since November 2019.  Output and new work rose sharply in December, with the latter driven by increased domestic demand as new export order growth was slower than in November. Firms increased purchasing activity and inventories on the back of increased demand. 

However, employment in the private sector declined slightly last month, even as new orders increased, with some firms citing cost-cutting measures. Input costs were unchanged in December, and selling prices only marginally higher than in November.  Many firms continued to offer discounts in order to secure new work.  

Panellists were more optimistic in December about the outlook for the coming year, citing the rollout of Covid-19 vaccines and the hope that this would lead to stronger demand. The future output index rose to the highest level in 12 months at 64.4.

The strong rebound in Saudi Arabia’s PMI reading in Q4 2020, which averaged 54.2 compared to 49.8 in Q3, suggests that our previous GDP growth forecast of -5.2% for 2020 was too pessimistic.  Recently released data shows that the non-oil sectors grew 8.8% q/q (-2.1% y/y) in Q3 2020.  If the rebound gained momentum in Q4 as the PMI data indicates, then overall GDP for 2020 would be closer to -4.0%.  We expect the Saudi economy to expand 3.3% in 2021, broadly in line with the government’s own forecast.

KSA PMI survey

Source: IHS Markit, Emirates NBD Research


Following three consecutive months of positive results over September to November – the first expansionary readings since July 2019 – the Egyptian PMI survey dipped back into negative territory in December. The final print of the year came in at 48.2, down from 50.9 the previous month, and indicating a slowdown in the non-oil private sector as compared to November. A fall in new orders back into negative territory after five months of expansion was one of the primary drivers of the headline figure’s decline, as firms became wary of renewed restrictions as Covid-19 cases ramped up once again.

Although the December figure is disappointing, it is still a vast improvement from the levels seen at the peak of the pandemic crisis. Egypt’s PMI fell to a nadir of 29.7 in April but the fourth quarter averaged a positive 50.2. This suggests to us that Egypt’s economic recovery will continue to outperform on the global stage, where it has been one of the very few economies to have likely recorded positive economic growth in calendar 2020.

Egypt PMI survey

Source: IHS Markit, Emirates NBD Research