The UAE and Saudi Arabia are expected to enjoy good economic growth this year, according to a Crédit Agricole Private Banking research report.

The ‘Macro Comment – Eastern Promises: Mena Update’ said Arab countries in the Middle East are in the mode of two-speed economies again, with bright growth prospects for oil-rich states and non-oil countries lagging behind.

“As oil-rich Gulf countries like the UAE and Saudi Arabia sign off the last quarter on a growth trajectory, it is interesting to note that the Arab nations of the Middle East are heading towards being two-speed economies again, with non-oil countries like Egypt and Lebanon registering less encouraging numbers. This fact is clearly evident from the Purchasing Managers’ Indexes (PMI) in March 2014”, said Dr Paul Wetterwald, Chief Economist, Crédit Agricole Private Banking.

In the UAE, the PMI index mark improved slightly to 57.7 (from 57.3 in February). In Saudi Arabia, the headline PMI (non-oil private sector economy) retreated further (to 57 from 58.6 in February), but from a fairly high level. PMIs in both countries remained largely above the expansion/contraction frontier set at 50.

Does this mean that the two countries are now prone to inflation? Indications derived from the PMI index for the UAE signal some increases in raw material prices and salaries. Part of these increases translated into higher output prices, said a statement.

In Saudi Arabia, March price increases, be it in terms of output prices, input costs, or staff compensation, were muted. To make a link with the CPI evolution one has to remember that what weighs the most in the Saudi consumer basket are foodstuffs and beverages (26pc of total weight). Renovation, rent, fuel and water count for 18pc and transport and telecommunication 16pc. - TradeArabia News Service