[ad_1]
Mid-market players in the UAE’s service and manufacturing sectors remain immune to the damaging effects of the global recession and soaring cost pressures, at least for now. But experts worry that the outlook for the next few months could darken if the market does not improve.
The economy of the GCC is expected to grow by 6.9% in 2022, before slowing to 3.7% and 2.4% in 2023 and 2024, according to the World Bank. However, growth forecasts are affected by geopolitical risks such as the Russia-Ukraine war and China’s zero-coronavirus policy.
Higher hydrocarbon revenues and the government’s nimble leadership and response to tough economic conditions have enabled the country’s businesses to withstand financial shocks and outperform many of their global peers.
headwind warning
“The fact is that there is a headwind. We cannot deny or ignore that,” said Hind Eisa Salim, executive vice president and head of services and manufacturing at Mashreq Bank.
“Businesses in the UAE have benefited from the swift measures taken by the authorities since the Covid-19 pandemic. But the UAE’s economy and its source markets are global – external issues will ultimately affect businesses.”
In addition, industries around the world continue to be buffeted by external mitigating factors that are inherently uncontrollable. Supply chain problems caused by the pandemic persist, while rising interest rates, higher container and fuel costs and higher commodity prices due to the Russia-Ukraine war are exerting downward pressure.
beyond expectation
The combination of sustained oil prices and growth in the non-oil sector ensured that the UAE’s post-Covid recovery continued despite a deteriorating global economic environment.
If more evidence was needed, the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) showed that the pace of expansion reached its highest level in more than three years in August 2022.
However, S&P Global reported that companies are starting to feel capacity constraints due to strong client demand and project backlogs.
price fluctuations
At the same time, price volatility and scarcity of raw materials make it difficult to accurately forecast profitability and demand, not to mention the uncertainty of capital expenditures.
The problem is compounded by the thin margins of middle-market companies and their inability to easily pass on additional costs to customers, Salim explained.
“Mid-market players lack the capital resources of larger companies, or the financial support that is provided to small businesses, because they are in the middle,” she said. “Their margins were already tight – now they’re starting to struggle as costs go up.
“Despite the dire global situation, the UAE remains one of the least affected countries due to stable oil prices,” Salim said.
bank support
Faced with these challenges, Saleem emphasized that banks, including Mashreq, are keen to support their customers.
“We realized that the cost of borrowing had almost doubled in the past year – that’s an aggressive increase for any business anywhere in the world,” she said. “We are actively having conversations with our customers and trying to find ways to help them through this period.
“We want our customers to know that we are on their side. We understand the challenges they face and want to support them as a partner.” —trade arab news agency
[ad_2]
Source link
