ECONOMIC TRENDS

MORE SAUDI JOBS POINT TO ALL-ROUND GROWTH PROSPECTS

The Saudi economy is flexing its muscles as growth levels reach new post-COVID-19 highs.

The non-oil sector reported a sharp expansion in business activity at the end of 2022, driven by robust market demand and new business intakes. The upturn fuelled an increase in employment that was the strongest seen in nearly five years, whereas stockpiling efforts slowed as purchase prices ticked higher, according to S&P Global, which tracks purchasing manager intentions around the world. Despite cost inflation softening, output charges rose to the greatest extent since March.

The S&P PMI index was firmly above the 50.0 no-change mark at 56.9 in December, signalling a sharp improvement in business conditions across the non-oil private sector.

“Central to the upturn was another strong increase in business activity, although the rate of growth eased from November's over seven-year high. Firms mainly linked the rise in activity to higher sales and improving market demand,” according to the monthly report

Concurrently, new order inflows rose sharply, with 30% of surveyed firms reporting growth compared to a month ago.

  

As sales surged, Saudi Arabian firms expanded their employment numbers in December in order to boost operating efficiency. The rate of job creation was the fastest recorded in almost five years. Higher staffing capacity helped companies to lower outstanding work for the seventh month running, although the rate of reduction was the softest
since June, S&P noted.

The new PMI data comes as the labour market improves. New data from the General Statistics Authority (GASTAT) suggests that unemployment rate of Saudis reached 9.9% in the third quarter of 2022, a slight increase of 0.2 percentage points (pp) compared to the second quarter.

The labour force participation rate of Saudis increased by 0.7 pp to 52.5%, and the employment-to-population ratio of Saudis increased by 0.5 pp to 47.3%. Compared to one year ago, key labour market indicators for Saudis improved, with rises in both the participation rate (up 2.7 pp) and the employment-to-population ratio (up 3.1 pp), while the unemployment rate was changed (down to 1.4 pp).

The overall unemployment rate in the kingdom (for Saudis and non-Saudis) was 5.8% in Q3/2022, unchanged from last quarter and changed from a year ago (down 0.8 pp).

“Among Saudi females, in Q3/2022 the unemployment rate rose to 20.5%, up 1.2 pp from last quarter, and down 1.4 pp from a year ago,” according to the report. The increase in the unemployment rate was accompanied by an expansion of labour force participation that outpaced growth in employment. The participation rate rose by 1.4 pp to 37.0%, while the employment-to-population ratio rose by 0.7 pp reaching 29.4%.

Among Saudi males, in Q3/2022 the unemployment rate fell to 4.3%, down 0.4 pp from last quarter, and down to 1.6 pp compared to a year ago.

Attitudes towards employment are also changing. More than 93% of unemployed Saudis would accept employment in private sector, according to the GASTAT survey.

Around 58.4% of unemployed Saudi females and 42.6% of unemployed Saudi males expressed interest in a maximum commuting time to work of one hour. Similarly, 73.7% of unemployed Saudi females and 90.3% of unemployed Saudi males indicated that they would accept work for eight hours or more per day.

 

GLOBAL GROWTH PROSPECTS

The World Bank’s latest forecast for the global economy points to a slowdown.

Worldwide economic growth is projected at 1.7% in 2023 and 2.7% in 2024, according to the bank, which expects a sharp downturn with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies

Growth in the Middle East North Africa is projected to decelerate to 3.5% in 2023 and 2.7% in 2024. The regional slowdown is mainly on account of a fading boom in net oil exporters where growth is expected to slow to 3.3% and 2.3% in 2023 and 2024, respectively, from 6.1% in 2022.

“While the estimated rebound in 2022 in Saudi Arabia was well above last June’s forecast, projections for growth for 2023 and 2024 have been revised down, to 3.7% and 2.3%, respectively,” the bank noted. “The downward revision to growth prospects reflects expected deceleration in major trading partners, new oil production cuts, and lagged effects of tightening domestic monetary policy.”