Saudi Arabia: Non-oil Economy Sees Fastest Growth in 4 years
Saudi Arabia’s non-oil private sector improved at the fastest pace since four years, with business conditions improving due to increased demand, according to an international survey covering 40 economies around the world.
IHS Markit indicated that Saudi Arabia Purchasing Managers’ Index (PMI) rose to 57.8 in October from 57.3 in September. The index was the highest since August 2015 and signaled a sustained improvement in growth momentum.
The results showed that the attacks on two Saudi Aramco oil facilities last September did not affect the broader economy, but continued to accelerate production growth and expand at the fastest rate in 22 months, supported by increased demand.
The report pointed out that demand is the main source of growth from the domestic market.
Growth increased this year after a slowdown in 2018 due to fuel price increases and the introduction of VAT by 5 percent.
Economist at IHS Markit, Amritpal Virdee, explained that growth momentum continued to build during October, with the headline PMI posting its highest figure since August 2015.
“Output and new orders expanded at faster rates, mostly driven by domestic sales,” however, he noted that employment growth was marginal and slowed from September, as firms remained cautious about taking on additional staff.
“At current levels, the PMI is indicative of GDP expanding at an annual rate of around 4 percent, which would be a notable acceleration in growth from the start of 2019.”
Average prices in October fell at the fastest rate since April as survey participants announced price cuts to attract customers.
Last week, Minister of Finance Mohammed al-Jadaan indicated that the preliminary economic results and indicators reflect significant progress.
Jadaan said at a press conference that the real GDP has achieved positive growth rates of about 1.1 percent during the first half of 2019 supported by the growth of the non-oil sector, which grew by 2.5 percent in the same period.
Initial estimates indicate that GDP is expected to grow by 0.9 percent in 2019, with an expected acceleration in non-oil GDP growth rates. This performance is expected to continue to improve in 2020, with GDP growth projected to reach 2.3 percent.
The Kingdom's fiscal policy aims to achieve a balance between maintaining fiscal sustainability and enhancing economic growth and development, said the Minister.
He also concluded that supporting economic transformation in line with Vision 2030 can be achieved through efficiency and effectiveness within the framework of fiscal discipline, improving the basic services provided to citizens, diversifying government revenue sources, and empowering the private sector.