ECONOMY

STRONG BUSINESS ACTIVITY KEEPS SAUDI’S ECONOMIC GROWTH ON TRACK

Saudi Arabia’s economy continues to tick upwards. Latest data from Standard & Poor’s Purchasing Managers’ Index (PMI) reveals the country’s non-oil private sector has expanded sharply in June.

New orders and production both soared at accelerated, multi-year record rates, encouraging firms to boost their purchasing activity at the fastest pace in the survey history. Jobs growth was maintained, and some firms reported paying higher wages to retain experienced staff.

“Latest data showed that output rose at the steepest rate since March 2015, whilst sales growth was the strongest for nearly nine years,” S&P said in its latest report, as survey respondents, led by manufacturers, note that underlying demand and market conditions were extremely positive, with sales rising both inside and outside the kingdom.

Firms responded positively to the upward trends in activity and sales by concurrently increasing their purchasing activity at a survey record rate

“Companies also sought to bolster stocks to prepare for expected growth in the coming months, with the rate of inventory accumulation reaching a 10-month high,” the report stated, adding that confidence in the outlook hit its highest level since January. “Anecdotal evidence suggested that firms expect to benefit from government-backed investment and infrastructure projects over the coming year. Constructors were especially optimistic.”

 

MACRO INDICATORS

Real GDP in the kingdom grew 3.8% in the first quarter of 2023, compared to the same period of the previous year.

Estimates of GDP for Q1 of 2023 by the General Authority for Statistics (GASTAT) showed a 5.4% increase in non-oil activities, a 4.9% jump in government activities, and a 1.4% increase in oil activities over Q1 of 2022.

Meanwhile, seasonally adjusted real GDP decreased by 1.4% in Q1 of 2023 compared to Q4 of 2022.

The strong showing comes after a stellar economic performance last year. The kingdom was the fastest-growing G20 economy in 2022, while its unemployment rates are at historic lows. Female participation in the labour force reached 36% in 2022, exceeding the target under Vision 2030.

“While the April 2023 OPEC+ production cuts would reduce overall real growth to 2.1% in 2023, non-oil growth is expected to average 5% in 2023 and remain above potential as strong consumption spending and accelerated project implementation boost demand,” the IMF said.

Inflation rate in the kingdom remained relatively stable over the first five months of 2023, reaching 2.8% in May, as the government introduced measures to rein in inflation.

 

LOGISTICS HUB

The kingdom’s latest National Industrial Development and Logistics Program, highlighted the progress of the Saudi Vision 2030 in its annual report, titled “Exponential Growth.”

Authorities launched the National Industrial Strategy (NIS), a roadmap for the rapid growth of the kingdom’s industrial sector. Meanwhile, the Saudi Industrial Development Fund approved loans valued at SAR 14 billion to boost the industrial, energy, and mining sectors, while the Saudi Export-Import Bank provided credit facilities valued at SAR 14.6 billion to facilitate access to non-oil exports.

“In the logistics sector, we witnessed the inauguration of a special integrated logistics area at King Khalid International Airport and the opening of an Apple distribution centre, both of which will help feed local and regional markets. Our railway system also achieved a number of key milestones, including the completion of a link between the networks in the north and east, and the inauguration of the internal network project in Jubail Industrial City,” according to Bandar Bin Ibrahim Al-Khorayef, minister of industry and mineral resources, and NIDLP chairman.

In the energy sector, five new projects were initiated to produce electricity using renewable energy. This includes three wind energy projects in Yanbu, Al-Ghat, and Waad Al-Shamal, and two solar projects in Al-Hanakiyah and Tabarjil. With total projected capacity of 3.3 gigawatts, these projects will attract investments valued at SAR 12 billion. The sector also achieved a 63% localisation rate for industrial related to oil and gas, reaching the 2022 target.

“With respect to the Fourth Industrial Revolution, the Saudi Authority for Industrial Cities and Technology Zones (MODON) evaluated 100 factories in the National Productivity Program initiative,” according to Eng.Suliman bin Khaled Al-Mazroua, the programme's CEO."This effort Fourth Industrial Revolution, which willcontribute to increasing the efficiency of these factories and achieving an impact of more than SAR 500 million, at SAR 5 million per factory.