Saudi Arabia's non-oil sector stays on growth trajectory
IHS Markit survey continues to indicate much stronger improvement in business conditions
Saudi Arabia's non-oil private sector stayed on a growth trajectory in December as business activity, new orders and employment expanded compared to the previous month, according to a survey by IHS Markit.
The rate of growth, however, lost momentum in comparison to the previous survey period. As a result, the IHS Markit Saudi Arabia Purchasing Managers' Index (PMI) slipped to 56.9 in December from 58.3 in November.
Tim Moore, economics associate director at IHS Markit, which compiled the survey, said the latest PMI points to a short-term setback for the non-oil private sector, with the growth of business activity and new work slipping since November.
"However, the survey continues to indicate a much stronger improvement in business conditions than at the same time during 2018, particularly in relation to new order books. Latest data also suggests that non-oil firms in Saudi Arabia are confident about the outlook for 2020, with business optimism holding at a much higher level than seen in the middle of last year," said Moore.
Saudi Arabia's Finance Minister Mohammed Al Jadaan has said the Saudi economy, the largest in the Arab world, is projected to expand 2.3 per cent in 2020 after growing an expected 0.9 per cent this year as the kingdom presses on with economic reforms and diversification that support its non-oil private sector.
The kingdom expects non-oil GDP growth to accelerate next year after increasing 2.5 per cent in the first half of this year.
The International Monetary Fund also expects Saudi Arabia's economy to pick up in 2020, forecasting 2.2 per cent growth as oil GDP stabilises and solid momentum in the non-oil sector continues.
The survey report said the latest reading was well above the 50.0 no-change value, but signalled the weakest improvement in business conditions for five months. December data indicated that business activity growth eased for the second month running and was the slowest since October 2018.
According to the IHS Markit report, total new business volumes in the kingdom increased sharply in December, but the pace of expansion moderated from the four-and-a-half year peak seen during November. Softer export sales were a headwind to overall demand, as signalled by a drop in new work from abroad for the first time since February, it said.
Saudi private sector companies remain optimistic about their growth prospects for the next 12 months. The degree of positive sentiment slipped a little since November, but remained comfortably above the levels seen in the middle of 2019. Survey respondents cited hopes of an improvement in underlying economic conditions and a corresponding rise in new business opportunities.
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