Arab News, Tuesday, Jun 06, 2023 | Thul-Qidah 17, 1444
Saudi Arabia’s non-oil sector growth steady as PMI clocks 58.5 in May
Saudi Arabia:
Saudi Arabia’s non-oil sector posted substantial momentum in May according to a
business survey, as the Kingdom’s economic diversification strategy continues to
progress.
The latest Riyad Bank Saudi Arabia Purchasing
Managers’ Index report, formerly the S&P Global Saudi Arabia PMI, revealed that
the Kingdom’s PMI stood at 58.5 in May, well above the 50 reading, indicating
economic growth.
This was a slight drop compared to the 59.6 figure
in April.
Naif Al-Ghaith, chief economist at Riyad Bank,
said despite the small decrease the high figure reinforces the view that overall
economic activity in Saudi Arabia is “holding up well.”
He added: “The Kingdom’s non-oil GDP (gross
domestic product) is likely to have notably grown in the second quarter this
year thanks to the healthy state of the private sector.
“While a slower oil economy and rising interest
rates will create a challenging environment for some establishments, most Saudi
firms are in good shape and experiencing robust business conditions.”
The report pointed out that new order inflows at
non-oil private sector businesses in the Kingdom significantly gained momentum
in May after growth quickened to its highest in just over eight-and-a-half years
in April. The rate of expansion, however, slowed slightly despite a renewed
upturn in sales from foreign clients.
According to the report, the rise in new orders
positively impacted the tourism and construction sectors in Saudi Arabia, which
ultimately resulted in a rise in job creation in May.
“New orders grew considerably, reflecting a strong
demand growth, particularly in tourism activities and construction. This led to
the joint-fastest rate of job creation since 2018 which allowed firms to work
through backlogs at a quicker pace this month,” added Al-Ghaith.
He further noted that higher employment and
activity levels drove wages to rise at the second-fastest pace in seven years,
leading to a “sustained markup in prices charged to consumers.”
According to the report, business expectations for
the next 12 months eased slightly in May, but firms are anticipating improved
market conditions, strong sales and supportive government economic policy to aid
growth prospects.
Al-Ghaith noted that the development of
giga-projects in the country aimed at diversifying the economy will continue
driving the growth of the private sector for the remaining months of this year.
“The government continues to implement large-scale
diversification policies and accelerate the development of giga-projects, aiming
to boost the private sector, the engine for job creation. Therefore, we are
confident that the non-oil sector will play a predominant role in driving growth
this year, supported by increased investments and robust demand,” said
Al-Ghaith.