Economic diversification: Saudi Arabia non-oil business activity accelerates in Feb
Business
Similar trend visible in United Arab Emirates
ABU DHABI (Web Desk/Reuters) – As Crown Price Mohammed bin Salman is leading the charge to make Saudi Arabia an economic and industrial hub by pursuing a strategy designed to minimise the country’s dependence on oil through economic diversification, a latest survey on Tuesday showed that non-oil business activity in Saudi Arabia rebounded in February – supported by the fastest output growth in five months.
Read more: Is there any lesson to learn from Saudi Arabia?
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index recovered to 57.2 in February, up from 55.4 in January which was the lowest reading in two years, says Reuters.
The sub-index for output rose to 61.5, the quickest pace of growth since September, signalling greater demand momentum. New order activity also rebounded, supported by a return to growth in export orders.
The new orders sub-index rose to 62.2 last month from 60.5 in January, firmly in expansion territory, but the increase was slower than in recent months.
Naif Al-Ghaith, Riyad Bank's chief economist said growth was driven by the services and construction sectors.
"Additionally, the upsurge in new export orders signified growing demand for domestic products from international markets and high competitiveness in local industries," he added.
The 12-month business outlook brightened in February from the previous month, helped by stronger demand projections.
Saudi Arabia's non-oil growth is expected to come in above 5 per cent in the medium term, its finance minister said in February, slightly lower than the 6pc figure previously projected.
Non-oil activities vastly outperformed the oil sector last year which slowed sharply on the back of cuts to oil production and lower prices.
UAE MOVES UP
Non-oil business activity in the United Arab Emirates accelerated in February after a slowdown the previous month, helped by a rise in output and business confidence, a survey showed on Tuesday.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index rose to 57.1 in February from 56.6 in January.
The output sub-index surged to 64.6 from 62.0 in January, the highest figure since June 2019, lifted by new business, stronger client activity and marketing activities.
"Capacity pressures were apparent however, with backlogs of work rising at their fastest pace in nearly four years, as Red Sea shipping disruption fed through into transport delays," said David Owen, senior economist at S&P Global Market Intelligence.
Attacks on vessels in the Red Sea by the Iran-aligned Houthis have disrupted global shipping since November and forced firms to re-route journeys which are longer and more expensive.
There had been no impact on the UAE so far, its trade minister said last month.
The new orders sub-index slowed to 60.4 in February, from 61.9 the month before, and while this still signals strong demand, the pace of growth was the weakest since last August, which some respondents attributed to greater competition.
Confidence in the outlook over the next 12 months accelerated to a four-month high, supported by stronger market conditions, higher profits, and new client projects, the survey said.
