Non-Oil Activity Growth Accelerates in Saudi Arabia
In a promising development for Saudi Arabia's economy, the non-oil private sector has shown significant growth, reaching its highest level in four months. According to a recent report by Riyad Bank, the Purchasing Managers' Index (PMI) rose to 56.3 points in September, up from 54.8 points in August. This increase not only marks the highest reading since May but also indicates a robust growth trajectory, as any reading above 50 signifies expansion in the sector.
The report highlights that this growth is primarily driven by a surge in new orders and employment opportunities. However, challenges remain, particularly in the form of a shortage of skilled workers, which has impacted the productive capacity of businesses. Naif Al-Ghaith, Chief Economist at Riyad Bank, emphasized the importance of this growth in the non-oil sector, especially in light of the Kingdom's efforts to reduce its reliance on oil revenues. He noted that the increase in domestic demand has been a crucial factor in this positive trend.
Saudi Arabia is navigating a complex economic landscape, with expectations of a larger fiscal deficit in the coming years due to increased spending aligned with its Vision 2030 economic plan. Despite this, the non-oil sector is projected to grow by 3.7% this year, a decrease from the average growth of about 6% seen over the past three years. Furthermore, Moody's credit rating agency has forecasted strong growth for the non-oil economy from 2025 to 2027, estimating real growth rates between 5% and 5.5% during this period, supported by ongoing economic diversification efforts and major projects.
As Saudi Arabia continues to implement its Vision 2030 initiatives, the resilience and growth of the non-oil sector will be vital for the Kingdom's economic stability and diversification efforts.
