SAUDI CONSUMERS RESILIENT IN FACE OF COVID-19

Consumer and business sentiment in Saudi Arabia is improving as the government implemented measures to counter the coronavirus and support its citizens, the private sector and the wider economy.

A new survey by polling firm Ipsos saw consumer sentiment in the kingdom among the most bullish in the world.

“Saudi Arabia has regained its number one rank when it comes to the current state of its economy, with China coming in second among all 24 markets surveyed,” Ipsos said in a recent report. “On the other hand, the country also remains in second place globally with consumers (80%), believing the kingdom is heading in the right direction, a slight increase from the previous month.”

Saudi consumers also came fifth globally in terms of their personal financial situation, with 19% reporting that their personal financial situation remains robust, only preceded by Sweden, China, the US and the UK.

As many as 56% of the Saudis surveyed said they were more comfortable about their ability to invest in the future compared to six months ago, including their ability to save money for their retirement and children’s education. That percentage was higher than the 44% global average.

The Primary Consumer Sentiment Index is a global index that Ipsos conducts monthly across 24 countries in conjunction with Thomson Reuters. The index assesses consumer perceptions towards the current and future state of consumption and investment in the local economy, and the consumers’ personal financial situation. It also measures consumers’ confidence to make large investments, and ability to save.

Saudi consumers told Ipsos that they felt the investment climate in the country was strong, at 59.2 points, head and shoulders above the global average of 35.1 points.

Majority of Saudi consumers (62%) also indicated more comfort in making major purchases, compared to six months ago.

Consumers are also opening their wallets, as economic conditions improve.
The value of transactions through points of sales (POS) in the kingdom rose to SAR 33.21 billion in September, up by 33.7% compared to the same period last year.
Meanwhile, the number of transactions through POS nearly doubled, to 96.67% year on year (YoY) in September to just over 292 million, compared with 148.5 million in September 2019, according to data from the Saudi Central Bank.
Mobile transactions also jumped to its highest ever level, as consumers responded to Saudi banks’ efforts to boost ecommerce, mobile payments and remote purchases in light of the pandemic and social distancing measures.

Mobile transactions rose to 72.2 million, a 495% jump compared to 12.1 million in September of the previous year. Meanwhile, sales using mobile phones rose 471.6% to SAR 6 billion in September, compared to the same period last year, Saudi Central Bank data shows.

McKinsey & Co. believes Saudi consumers’ income and savings did not see massive declines as elsewhere in the world due to government support.

“Consumers are not yet fully comfortable going back to ‘regular’ out-of-home activities and are waiting for milestones beyond government lifting restrictions to return to normal patterns. Thus, they have started adopting new digital and low-touch activities, including grocery delivery,” the management consultancy said.

Business activity also appears to be coming back. The latest IHS Markit Saudi Arabia PMI (purchasing managers index) rose to 51 points in October, compared to 50.7 in September. A figure above 50 indicates improving economic conditions.

The IHS data shows that the non-oil economy saw its quickest acceleration since February. Companies reported higher activity, increased sales, new contracts, and resumption of a number of projects.

“Efforts to increase output at Saudi Arabian companies led to a renewed expansion in purchasing activity in October. Firms also looked to build stocks, as inventories of purchased items rose at the strongest pace since July. As a result, firms were able to improve capacity, which allowed them to reduce backlogs more quickly,” IHS Markit noted.

Companies also reported that their costs were under control, although inflation had picked up due to higher value added taxes.

The research firm did note that the economic rebound since restrictions eased have been countered with some businesses facing financial issues.

“Many businesses are hopeful that growth will strengthen in the coming 12 months, but there remains a high number of firms uncertain that markets can be fully revived with COVID-19 infections still prevalent around the world,” IHS noted.