Saudi Arabia’s private sector outside of oil is picking up speed. According to the latest data, business activity in the Kingdom’s non-oil economy climbed to its highest level in three months during May 2026, a sign that the sector is finding its footing again after a tough start to the year.
What the Numbers Say
The Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 52.8 in May from 51.5 in April. Any reading above 50 signals growth, so this is firmly in positive territory. While the figure is still below the long-run average of 56.8, the direction of travel is encouraging.
New orders edged up, output accelerated at the fastest pace in three months, and backlogs of work grew for the 11th consecutive month, though at the slowest rate in nearly three years as businesses started clearing their workload backlog more efficiently.
What Is Driving the Recovery
Three things are pulling the numbers higher:
Domestic demand is strengthening. Businesses across the Kingdom reported a clear pickup in local orders, which has been the backbone of this recovery.
Contracts are coming back. Projects and deals that were paused or delayed earlier in the year, particularly following the disruption caused by regional conflict in March, are being revived. That month, Saudi Arabia’s PMI dropped sharply to 48.8 after Iran’s retaliatory strikes triggered widespread airport closures, port disruptions, and financial market volatility. The rebound since then has been gradual but consistent.
Supply chains are stabilizing. Supplier delivery times shortened for the first time in three months as firms leaned more on local vendors, reducing their exposure to international shipping delays and higher freight costs.
Where Caution Still Exists
It is not all good news. Export sales fell for the third consecutive month, weighed down by ongoing shipping disruptions, elevated freight and fuel costs, and geopolitical uncertainty in the region. Job creation also slowed to its weakest pace since October 2025, and input costs remained high due to pricier materials and transport.
Business confidence, while present, stayed muted. Companies are hopeful about the year ahead but leaders are keeping a close eye on international inflation risks and regional tensions.
The Bigger Picture for Saudi Arabia’s Economy
Naif Al-Ghaith, Chief Economist at Riyad Bank, said the May PMI reading supports the view that Saudi Arabia’s non-oil economy will continue trending upward through the rest of 2026. He pointed to improving domestic demand, steadier supply chains, contained inflation, government-led investment activity, and solid trade performance as the key pillars holding up private sector growth.
This matters in the context of Vision 2030. The Saudi government has been working hard to reduce the country’s reliance on oil revenues, and a resilient non-oil PMI reading, even in a challenging regional environment, suggests that diversification efforts are gaining real traction.
Source: Economy Middle East https://economymiddleeast.com/news/saudi-arabia-non-oil-private-sector-growth-hits-three-month-high-in-may-with-pmi-rising-52-8-percent/
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