SAUDI BUSINESS CONFIDENCE UP AS POST-PANDEMIC RECOVERY GATHERS PACE 
Business confidence hits a new two-year high in Saudi Arabia, amid elevated commodity prices, strong domestic growth, and prospects of a ‘soft landing’ for United States and Chinese economies.
Output and new business growth in the kingdom’s non-oil private sector accelerated in January, although job creation slowed from December’s near five-year high as firms continued to reduce their backlogs, according to S&P Global’s monthly purchasing manager index (PMI) survey. Purchasing activity increased sharply and supply chains showed further signs of improvement, while inflationary pressures on both costs and charges softened from December.
“New order inflows continued to rise at a marked pace in January, as firms typically commented on improving demand conditions and stronger client orders,” S&P Global, which tracks PMI across the world, stated in its latest report. The rate of increase was also the second sharpest in 16 months, while demand from foreign clients soared rapidly and to a greater degree than at the end of 2022.
“Subsequently, non-oil activity levels expanded sharply in January, with around a third of all surveyed companies seeing an uplift on the month,” the survey noted, adding that businesses provided a stronger projection for activity levels in the upcoming year.
“The degree of positivity picked up to the highest level since January 2021, as panellists (non-oil purchase managers) largely expect demand growth to continue and market conditions to improve.”
The rising business sentiment echoes the upbeat mood around international investors.
The latest available foreign direct investment data from Invest Saudi suggests 203 deals were closed by the third quarter of 2022, a rise of 133.3% compared to 87 deals in the same period last year.
The number of investment licenses surged by 527.4%, or 15,000 licenses, during the period compared to the previous year.
“The efforts to improve the investment environment, attract foreign investments and enhance local investments have contributed to achieving the objectives of the National Investment Strategy in 2021, by reaching 112.4% of the total investment target, and 172.3% of the FDI inflows target in 2021,” according to the Invest Saudi report.
MACRO INDICATORS
Separately, the Industrial Production Index (IPI) also rose 7.3% in December 2022 compared to the same period in 2021, in a sign of a strong post-pandemic rebound, according to the General Authority for Statistics (GASTAT).
Saudi oil production rose to more than 10 million barrels per day during the period, while mining and quarrying grew by 4.1% compared to the same month in the previous year. In addition, manufacturing activity jumped 18.5% versus December 2021.
Latest trade data from GASTAT also suggest strong uptake on the kingdom’s exports. Merchandise exports rose 3.6%, valued at SAR 112.8 billion, in November 2022, up from SAR 108.8 billion in November 2021.
This increase was largely driven by oil exports, which rose by SAR 9.5 billion or 11.8% in the same period, increasing to SAR 90 billion from SAR 80.5 billion in November 2021.
Non-oil exports (including re-exports), however, fell 19.7% to SAR 22.7 billion from SAR 28.3 billion in November 2021.
Merchandise imports increased 26.5% to SAR 62.7 billion during the month, compared to SAR 49.6 billion in the same period of the previous year.
FINANCING PLAN
The upbeat sentiment is driven by strong fiscal buffers that underpin the Saudi economy. Building on that stability, the Ministry of Finance approved the 2023 annual borrowing plan, which aims to outline the sovereign debt developments, debt market initiatives for 2022, the 2023 funding plan and its guidelines, in addition to the domestic Sukuk issuance calendar under the Saudi Arabian Government SAR-denominated Sukuk Program.
The ministry has estimated financing needs of approximately SAR 45 billion, after securing approximately SAR 48 billion of the 2023 total financing needs in 2022 through pre-funding activities.
“Despite the expectation of achieving a budget surplus during the year 2023, the Kingdom aims to continue its funding activities in the domestic and international markets with the objective of repaying debt principal that will mature during the year 2023 and during the medium-term; utilising opportunities based on market conditions to enter into pre-funding and liability management transactions, financing strategic projects; and executing government-alternative funding transactions that will promote economic growth such as capital expenditure and infrastructure financing,” according to the ministry.
The ministry has already successfully issued a USD 10 billion triple-tranche bond offering, which witnessed an oversubscription of 3.8 times, or USD 38 billion. The value of the first tranche is at USD 3.25 billion for a five-year bond maturing in January 2028; the second tranche totalled USD 3.50 billion for a 10.5-year bond maturing in July 2033,
while the third tranche totalled USD 3.25 billion for a 30-year bond maturing in January 2053.
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