Saudi Arabia’s Non-Oil Business Activity Hits Lowest in Two and a Half Years
Growth in non-oil business activity in Saudi Arabia has slowed to its lowest point in two and a half years, according to the latest Purchasing Managers’ Index (PMI) data.
The Riyad Bank Saudi Arabia PMI for June was 55, seasonally adjusted, Reuters reported. This was a decrease from May’s 56.4 but still indicates a healthy growth rate.
“Looking at the second quarter as a whole, the growth figures for Q2 still indicate a positive outlook for non-oil GDP in Saudi Arabia, with expectations of growth exceeding 3%,” said Riyad Bank’s chief economist, Naif Al-Ghaith.
Saudi Arabia has been working to boost its non-oil economy, increasing the share of such activities in budget revenues to 50% last year. The kingdom’s non-oil economy was valued at approximately $453 billion in constant prices last year.
However, as Saudi Arabia continues to limit oil production, its oil activity’s contribution to the budget is suffering. The non-oil sector and government activities grew in the first quarter of 2024, but a 10.6% decline in oil activities, due to the Saudis limiting oil production to 9 million barrels per day, dragged down the Kingdom’s GDP by 1.8% compared to the same period in 2023, according to Saudi Arabia’s General Authority for Statistics.
The restriction on oil production is expected to continue for the foreseeable future, given the latest oil price developments and outlook. Brent crude has been rising due to geopolitical concerns in the Middle East and strong demand expectations in the U.S., but it is still lower than what Riyadh needs.
Even a drop in exports in June, accounting for half the global oil export draw of 1 million barrels per day, did not significantly accelerate the price rise. These developments may encourage Riyadh to intensify efforts to expand its non-oil economy.