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Private Sector Boom Continues in Saudi Arabia, UAE

Economic growth in Saudi Arabia compared to G20 countries (SPA)
Economic growth in Saudi Arabia compared to G20 countries (SPA)
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Private Sector Boom Continues in Saudi Arabia, UAE

Economic growth in Saudi Arabia compared to G20 countries (SPA)
Economic growth in Saudi Arabia compared to G20 countries (SPA)

Private non-state oil-producing companies in Saudi Arabia and the UAE witnessed a powerful resurgence in June, fueled by a surge in production and new orders.

The notable surge in production and new orders in Saudi Arabia, reaching the highest levels in several years, prompted companies in the Kingdom to ramp up their purchasing activities swiftly, aiming to meet the growing demands for inventory support.

These insights are based on Riyad Bank Saudi Arabia Purchasing Managers’ Index report, compiled by S&P Global.

June’s headline PMI number came in at 59.6, up on May’s 58.5 and again indicative of a strong, above trend rate of growth.

According to the index, PMI readings above the 50-mark show non-oil private sector growth, while those below 50 signal contraction.

“The Kingdom’s non-oil private sector remained on a steeply upward growth trajectory by the end of the second quarter, as inflows of new business accelerated, particularly in construction and tourism activities,” said Naif Al-Ghaith, the chief economist at Riyad Bank.

The sub-index for new orders rose to 69.5 in June from 67.3 in the previous month, marking its highest level since September 2014. This increase was driven by strong demand and favorable market conditions.

The Saudi government is injecting billions of dollars into the development of non-oil sectors, aiming to diversify revenue sources away from hydrocarbons. Special emphasis is placed on creating employment opportunities for the youth.

“Ultimately, government-backed investments, especially in construction and infrastructure projects, remain crucial for the business sector,” said Al-Ghaith.

He further added that the sentiment towards future activity remains positive.

Commenting on the recent figures, Saudi Shura Council member Fadhel Al-Buainain told Asharq Al-Awsat that the Saudi economy has entered an important phase of growth after recovering from the coronavirus pandemic.

According to Al-Buainain, the witnessed recovery is a result of the government’s measures to mitigate the pandemic’s negative impacts on the economy.

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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."