In recent developments, the non-oil sector of Saudi Arabia has shown significant growth, driven by a surge in new orders, marking the quickest pace in half a year. This progression aligns with the kingdom’s strategic efforts to diversify its economy beyond its traditional oil-based revenue streams.
The headline Riyad Bank Purchasing Managers’ Index (PMI) indicated a consistent reading of 57.5 in December for a second consecutive month, signaling a robust expansion as the index stays well beyond the 50-point threshold that distinguishes growth from decline.
For over three years, the PMI has remained above the neutral mark, suggesting a sustained positive trend in the non-oil economic sector, as affirmed by recent data.
The observed enhancement in operational conditions across the non-oil sector was propelled by notable increases in business activities and export orders. Naif Al-Ghaith, Chief Economist at Riyad Bank, emphasized the sector’s resilience and vitality.
Government-led initiatives and the discovery of new market opportunities have catalyzed the most rapid growth in exports since July.
Expectations within non-oil companies remain optimistic for the forthcoming year, with forecasts of continued robust growth in business inflows. Al-Ghaith highlighted the sector’s performance in 2023, outstripping the expansion seen in the previous year and underscoring the success of policies aimed at minimizing reliance on oil-generated income.
These strategic moves have fortified the nation’s non-oil industries, enhancing their competitive edge. The PMI’s positive trajectory as the year draws to a close is indicative of the promising direction for Saudi Arabia’s economic diversification.
As the top global oil exporter, Saudi Arabia is undergoing an economic transformation under its Vision 2030 agenda, aimed at fostering domestic industries and increasing employment.
The Saudi economy, which saw an 8.7 percent growth in 2022, the highest among the G20 nations, is projected to witness a 0.8 percent expansion in 2023 as per International Monetary Fund forecasts.
Several initiatives support the non-oil economy, including regulations that incentivize multinational corporations to establish a local presence in the kingdom or risk missing out on government contracts. Benefits offered include a substantial 30-year tax exemption.
Although employment growth in the non-oil private sector slowed in December after peaking in October, companies reported one of the fastest sales growth rates in nine years, citing new clientele and stronger demand.
Businesses have also benefited from significantly reduced average supplier delivery times, one of the sharpest improvements since the survey’s inception 14 years ago.
Even with evidence of hiring skilled staff to manage workloads, the overall employment increase was moderate. Al-Ghaith noted that the demand surge and expansion in the non-oil sector positively impacted employment, with a notable uptick in skilled labor requirements and rising wages.
This favorable employment climate reflects the government’s successful efforts in cultivating a diversified and robust economy, offering job opportunities and enhancing living standards for its citizens.
The unemployment rate in Saudi Arabia saw a decrease in the third quarter of 2023 on an annual basis, attributed to a higher employment rate among women. The General Authority for Statistics reported a drop to 5.1 percent from 5.8 percent in the same quarter of the previous year.
Within the construction sector, companies are displaying optimism about growth prospects for the current year, surpassing other key sectors.
As part of its economic diversification agenda, Saudi Arabia is advancing various new projects across different sectors, including real estate, tourism, entertainment, and infrastructure. Notable among these projects are Neom, a $500 billion megacity on the Red Sea, and Qiddiya on the outskirts of Riyadh, a sports and entertainment complex with over 325,000 job opportunities anticipated.