Arab economies set for 3.3% growth in 2024 amid declining inflation: AMF report

Jeddah - Yasmine El Tohamy - RIYADH: Saudi Arabia’s private sector non-oil growth remained steady in May, with the Kingdom’s Purchasing Managers’ Index reaching 56.4, a slight decline from 57 in April, official data showed. 

According to the Riyad Bank Saudi Arabia PMI report by S&P Global, business activity in Saudi Arabia rose at a substantial rate in May, continuing a period of robust output growth across the non-oil economy. 

In March, PMI stood at 57, while it was 57.2 in February and 55.4 in January. 

S&P Global noted that any PMI reading above 50 indicates growth in the non-oil sector, while readings below 50 signal contraction. 

Naif Al-Ghaith, chief economist at Riyad Bank, said: “The PMI for Saudi Arabia’s non-oil economy shows a positive trend, driven by increasing demand as evidenced by the rise in new orders. This growth has necessitated an increase in employment to meet the growing demand for goods and services.”   

He added: “However, the surge in demand has also led to price pressures impacting input prices and staff costs, although the increase in output prices has been observed at a slower pace. This balancing act reflects the challenges faced by businesses in managing costs while trying to capitalize on the expanding market.”  

The report highlighted that business activity and new order growth in the Kingdom remained steep in May, amid further reports of strong demand conditions, especially in domestic markets. 

Robust inventory growth continued in May after reaching its highest on record in April, as companies sought to prepare for strong sales performances in the future. 

“Furthermore, the rise in inventory levels and prices has prompted firms to adjust their purchasing behaviors to align with their sales strategies. This cautious approach indicates a strategic response to the changing market dynamics and the need to maintain a sustainable business model,” added Al-Ghaith.  

The PMI survey noted that companies reported increasing their activity due to strong demand conditions and efforts to fulfill pending workloads. 

The report added that business growth was broad across the monitored sectors, with construction noting the sharpest expansion. 

Moreover, companies operating in the non-oil private sector increased their employment levels in May, primarily driven by higher workloads, offsetting the first decline in over two years in April. 

Al-Ghaith further noted that Saudi Arabia’s efforts to diversify the Kingdom’s economy will strengthen the growth of the non-oil gross domestic product. 

“The latest flash estimates of the non-oil GDP growth in the first quarter and the forecast for the second quarter suggest a continuation of this upward trajectory. It is anticipated that the non-oil GDP growth will exceed 3 percent, driven by ongoing efforts to diversify the economy in line with Vision 2030,” said Al-Ghaith.  

He added: “This strategic vision underscores the government’s commitment to reducing its dependence on oil revenues and fostering a more diversified and resilient economy, paving the way for sustained growth and development in various sectors.”