According to Bloomberg article published on March 5, 2023, business activity in Saudi Arabia’s non-oil private sector expanded at the fastest pace in almost eight years as an economic boom fueled rising demand.
New orders rose in February by the most since September 2014, and companies are optimistic about the year ahead, according to a survey of purchasing managers compiled by S&P Global.
The Riyad Bank Saudi PMI rose to 59.8 last month from 58.2 in January, well above the 50-mark separating growth from contraction and the highest since March 2015.
“Economic conditions remain favorable across business activities,” Naif Al-Ghaith, chief economist at Riyad Bank, said in the report. “Despite tighter monetary conditions, demand and supply balance seemed robust and spurred by the ongoing projects around the kingdom.”
The buoyancy of the non-oil private sector — the engine of job creation for the world’s top crude exporter — reflects the momentum in the economy. The kingdom has so far been largely immune to global economic woes with high oil prices putting the government on track to record a second year of budget surplus and inflation remaining subdued. Non-oil growth hit 6.2% in the fourth quarter last year, the highest level since the third quarter of 2021.
New projects as well as increased consumer numbers and some price promotions helped to boost sales in February, according to the report. Export orders also increased at “a sharp and quicker pace.”
This pushed job numbers to rise at the second-fastest rate in five years.
However, greater input demand led some vendors to raise their prices, which pushed inflation to its highest level since November. The uplift was also partly driven by an increase in staff wages for the fourth month in row.
“We maintain our inflation forecast just below 3% amid the ongoing cost pressures and the current elevated demand that we believe will continue in the medium term,” said Al-Ghaith.
The outlook for activity over the next 12 months was also strong. Despite slipping from January’s two-year high, it remained above the average recorded in 2022.
“Businesses displayed a robust degree of confidence towards future activity,” said Al-Ghaith. “The current improved market conditions are promising, coupled with the positive expectations towards the pickup in the emerging economies”.
