Economic diversification: Saudi non-oil business activity growth hit a four-month high
Business
Creating jobs in an expanded private sector is a priority under Mohammed bin Salman’s Vision 2030
DUBAI (Reuters) – Growth in non-oil business activity in Saudi Arabia accelerated for a second consecutive month in October, a survey showed on Sunday, with new orders supporting an overall expansion in activity which led to a sharp rise in employment levels.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index rose to 58.4 in October from 57.2 in September - far above the 50 mark, denoting growth and the highest reading since June.
New business expanded faster with the new orders subindex surging to 66.1 in October, also a four-month high, from 64.2 the previous month.
The growth in output and new business was spread across most sectors, including manufacturing and construction, the survey showed. Growth in output remained high although the subindex eased to 60.1, weaker than the long run trend.
"The surge in new orders signifies an expanding market and suggests that the non-oil sector is experiencing sustained growth and demand for its products," said Naif Al-Ghaith, chief economist at Riyad Bank.
"The employment expansion is a promising sign for the Saudi economy, as it suggests a growing demand for labour and a potential improvement in the job market," he added.
Read more: Is there any lesson to learn from Saudi Arabia?
The employment subindex rose to a nine-year high of 54.5 in October from 52.0 in September.
Job creation for citizens in an expanded private sector is a priority for the government as it implements a wide-reaching economic diversification plan known as Vision 2030 spearheaded by Crown Prince Mohammed bin Salman.
The government estimates non-oil economic growth in 2023 of around 6 per cent, significantly outperforming overall GDP growth.
While the degree of confidence in future output eased from the previous month, firms remained optimistic overall.
WHAT DOES IMF SAY?
The International Monetary Fund had said earlier in September that non-oil growth in Saudi Arabia will remain close to 5pc in 2023, spurred by strong domestic demand.
“Saudi Arabia’s economy is booming, unemployment is at a record low, the output gap is closed, inflation is contained, and fiscal and external buffers have been rebuilt. The continuation of Vision 2030 reforms has helped advance the country’s economic diversification agenda, including through reduced reliance on oil.”
“Diversification has been driven by improvements in the regulatory and business environment. As a result of a new set of laws to promote entrepreneurship, protect investors’ rights, and reduce the costs of doing business, new investment deals and licenses grew by 95pc and 267pc in 2022, respectively. In addition, the Saudi Investment Fund (PIF) has been deploying capital, including to help stimulate private sector investment. “
“The economy’s non-oil growth has been spurred by strong domestic demand, particularly private non-oil investment. Sustaining this performance requires pursuing sound macroeconomic policies and maintaining the reform momentum, irrespective of developments in oil markets.”
