March witnessed the continuation of expansion within the non-oil private sectors of Saudi Arabia and the UAE, despite a slight deceleration. This was fueled by a substantial increase in new orders and output growth, maintaining the economic vitality of the two predominant economies in the Arab region.
The seasonally adjusted Riyad Bank purchasing managers’ index, an essential indicator of Saudi Arabia’s non-oil economy, declined marginally to 57 in March, down from 57.2 in February. Nevertheless, it remained significantly above the 50 threshold, indicating ongoing expansion.
In March, the kingdom experienced a considerable surge in output, the strongest in half a year, attributed to robust order intakes and favorable demand conditions.
Furthermore, the rate at which new orders were received by non-oil companies accelerated for a second consecutive month, with reports indicating that thrice as many businesses experienced an increase in new business compared to those that saw a decrease.
For the first time since mid-last year, demand from international markets for companies in Saudi Arabia showed consecutive monthly growth in March.
The influx of orders and client acquisition has not only strengthened current operations but also established a groundwork for sustained expansion and prospective business growth going forward,
stated Naif Al Ghaith, chief economist at Riyad Bank.
The latest Saudi PMI data reflects a robust and dynamic non-oil economy, driven by a surge in demand and heightened business activity,
he added, emphasizing the market’s resilience indicated by improved order books and new customer acquisition across various sectors.
Employment rates also saw an uptick to accommodate the increased workloads, with the pace of hiring exceeding the survey’s average for the second month in a row.
Businesses in the non-oil sector also hold a positive outlook for the future, with optimism for the upcoming year reaching its highest level since November of the previous year.
Saudi Arabia, in pursuit of diversifying its economy beyond oil under its Vision 2030 initiative, is enacting reforms and launching initiatives to reduce reliance on oil revenue, enhance non-oil industries, and develop sectors such as technology, real estate, tourism, and infrastructure. These efforts aim to create jobs and stimulate the non-oil economy’s growth.
Despite a 0.8 percent contraction in the overall Saudi economy last year due to a decline in the oil sector, the non-oil sector witnessed a 4.4 percent expansion. The kingdom’s gross domestic product surpassed 4 trillion Saudi riyals, and economic growth is forecasted at 2.7 percent this year and 5.5 percent in 2025, as per the International Monetary Fund’s estimates.
In the UAE, the headline S&P Global purchasing managers’ index experienced a slight dip to 56.9 in March from February’s near five-year peak of 57.1.
The UAE’s non-oil private sector continued to enjoy robust demand, with a notable increase in new orders in March. The overall picture for the UAE non-oil private sector remained rosy at the end of the first quarter,
remarked David Owen, senior economist at S&P Global Market Intelligence.
Approximately one-third of surveyed businesses in the UAE reported a significant increase in activity during the survey period. The non-oil economy presently constitutes 73 percent of the UAE’s GDP, marking a historic milestone for the country. However, the UAE Central Bank has adjusted its economic growth projection to 4.2 percent from an earlier estimate of 5.7 percent, attributing the revision to a slower recovery in oil production and a robust, albeit slowing, non-oil sector growth. The bank anticipates an acceleration to 5.2 percent growth in 2025.
Businesses in the UAE also reported a sharp increase in backlogs of work, the highest since June 2018, partly due to disruptions caused by the Red Sea shipping crisis. Nonetheless, the optimism for future business activity remains high, the second-strongest in four years.
Contrastingly, Egypt’s non-oil private sector economy continued to face challenges, with notable declines in business activity and new orders, largely due to currency market volatility affecting customer demand and pricing.
Despite these challenges, the S&P Global purchasing managers’ index for Egypt rose slightly to 47.6 in March, pointing to a milder yet persistent downturn in the sector’s health.