Saudi businesses, particularly those in the non-oil sector, are expanding on orders that have already been received at the fastest rate since January 2018. According to the most recent PMI data from Riyad Bank for December, stockpiling by these companies is also slowing down as purchasing expenses increased.
But it is the hiring spree that has got the markets talking, helped, no doubt, by the still upbeat oil price range and the global demand for it. This has rubbed off strongly on workforce expansion in the Saudi non-oil sector. This could be sustained into this year, with the Saudi economy forecast to grow at 4 percent plus. “Job creation in the non-oil sector has never been this strong in almost five years,” said Naif Al Ghaith, Chief Economist at Riyad Bank.“ This is attributed to the ongoing reforms that support the private sector under the Saudi Vision 2030. “We see operating conditions remaining favorable in December, characterized by rapid growth in the non-oil activities and a robust labor market by the end of 2022, with both jobs and wages having far more momentum than previously thought.”
Adding more staff had an immediate impact, with companies able to cut their work backlog for the seventh month running. Saudi Arabia’s PMI score closed the year at 56.9, well above the 50.0 median. But it was still a drop on the 58.5 recorded in November. Apart from the operating environment, businesses were mixing their thoughts of the future with ample caution. The optimism stemmed from still strengthening demand and forecasts of increased investment linked to the Vision 2030 initiative. But the degree of optimism weakened to a seven-month low and remained much softer than the long-run trend.
Businesses were reporting sharp rise in new orders received, with 30 per cent of surveyed firms reporting growth in December from a month ago tally, and helped along the way by orders from overseas too. The service sector was best-placed among the four surveyed for the PMI (Purchasing Managers Index) reading. (The PMI score gives a measure on how businesses are performing based on details such as orders received, their expansion plans, hiring strategies, etc).
According to Al Ghaith, “December data points to a continuous growth for the fourth quarter with optimism on the upcoming year. This made us comfortability project growth of non-oil GDP to exceed 4 per cent in 2023.”
