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Saudi Arabia’s Non-oil Activity Rises to Highest Level in 8 Years

Non-oil activity increased due to a strong rise in demand and a positive economic outlook. (Asharq Al-Awsat)
Non-oil activity increased due to a strong rise in demand and a positive economic outlook. (Asharq Al-Awsat)
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Saudi Arabia’s Non-oil Activity Rises to Highest Level in 8 Years

Non-oil activity increased due to a strong rise in demand and a positive economic outlook. (Asharq Al-Awsat)
Non-oil activity increased due to a strong rise in demand and a positive economic outlook. (Asharq Al-Awsat)

Non-oil private business activity in Saudi Arabia rose to an 8-year high in February, supported by a strong increase in demand and a positive economic outlook. The Kingdom’s Purchasing Managers Index hit 59.8, up from 58.2 in January, at the fastest rate of increase since March 2015.

Sunday’s survey showed that the large rise in new orders indicates an improvement in the economic conditions of companies. The new orders sub-index rose to 68.7 last month, the highest reading in more than eight years, from 65.3 in January, extending a recent upward trend and building strong demand momentum.

As a result, the output sub-index registered a strong increase, reaching 65.6 in February from 63.6 in the previous month, which led to further expansion in hiring and purchasing.

Naif Alghaith, chief economist at Riyad Bank, said that despite the tightening of monetary conditions, the balance of supply and demand seemed strong and driven by ongoing projects across the Kingdom, which led to a sharp rise in production and new orders for companies, in addition to an increase in the demand for labor.

However, the strong improvement in demand in February has pushed inflationary pressures higher.

“Prices have responded to the surge in demand, with the increase in input costs evident especially in the services and construction sectors. To that end, we maintain our inflation forecast just below 3 percent, amid the ongoing cost pressures and the current elevated demand that we believe will continue in the medium term,” Alghaith noted.

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Lebanon Hopes to Meet Foreign Bondholders in Coming Year, Finance Minister Says

A view shows Lebanon's Central Bank building in Beirut, Lebanon January 12, 2023. (Reuters)
A view shows Lebanon's Central Bank building in Beirut, Lebanon January 12, 2023. (Reuters)
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Lebanon Hopes to Meet Foreign Bondholders in Coming Year, Finance Minister Says

A view shows Lebanon's Central Bank building in Beirut, Lebanon January 12, 2023. (Reuters)
A view shows Lebanon's Central Bank building in Beirut, Lebanon January 12, 2023. (Reuters)

Lebanese officials hope to meet international bondholders to talk about restructuring debt in the next 12 months but are not planning any meetings at the World Bank/IMF Spring meetings next week, finance minister Yassin Jaber said on Tuesday.

Jaber spoke to Reuters just days before travelling to Washington for the Spring meetings - one of the biggest gatherings for financial policy makers and investors - where Lebanon will seek to show it has made progress on economic reforms to address the underlying causes of its financial crash.

Lebanon's economy began unravelling in 2019 after years of corruption and profligate spending by the country's ruling elite, and tipped into a sovereign default on its $31 billion of outstanding international bonds in March 2020.

Asked whether he planned to meet international bondholders in the next year, Jaber said, "definitely, definitely, this is as they say the elephant in the room."

"You can't escape it in the end. Lebanon is keen to resolve this issue, God willing," he said.

But the country needed to make progress on reforms - including reforming the banking sector and boosting government revenues through reforms to tax systems and customs collection - before it could start talks, Jaber said.

"We wanted, first of all, to do our homework, to put the whole reform process on the right track to get started. You can't have a house in total disorder and then say, 'I want to negotiate,'" he said.

The Lebanese delegation to the spring meetings will be the first outing at an IMF/World Bank meeting for Lebanon's new government, which took the reins in February and pledged to seek a new IMF programme. Jaber said it would be the first time a Lebanese finance minister attends in more than a decade.

Economy Minister Amer Bisat is scheduled to give an outlook on Lebanon's economy at a JPMorgan investor conference held on the sidelines, according to documents seen by Reuters.

The creditor group - which includes the heavyweight funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T-Rowe Price as well as a group of smaller hedge funds - has recently appointed a financial advisor in preparation for debt talks.

Shortly after the bondholder group originally formed in 2021, it said it held a "blocking stake" of more than 25% across a number of Lebanon's bonds, making it a critical player in any debt restructuring.

The chunk of the bonds are also held by domestic commercial banks or the Lebanese central bank, which bought $3 billion of debt directly from a previous government in 2019.

Lebanon's bonds trade at deeply distressed levels of around 15-16 cents in the dollar. However, that is a sharp uptick from the single digits they traded in before Israel's military campaign badly weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming Lebanon's political paralysis.

In January, Lebanon's cabinet extended the statute of limitations on legal action over Eurobonds for another three years. Jaber said the move "reassured the bondholders".