Saudi Arabia’s non-oil private sector closed 2024 strongly, driven by the latest Purchasing Managers’ Index (PMI) survey indicated by the fastest sales growth in a year. The Riyad Bank Saudi Arabia PMI, compiled by S&P Global, recorded a robust 58.4 in December, underscoring the continued expansion of the Kingdom’s non-oil sector.
The December PMI highlights the sustained momentum of Saudi Arabia’s economic diversification efforts under Vision 2030, which focuses on reducing oil dependency and promoting sustainable growth. Although slightly below November’s 17-month high of 59, December’s PMI reading remained well above the 50-mark threshold that signals growth. For context, the PMI registered 56.9 in October, 56.3 in September, and 54.8 in August, maintaining a consistent upward trajectory since September 2020.
Key Drivers of Growth
The PMI survey revealed that December’s growth was fueled by a sharp rise in total sales volumes in the non-oil sector. Strong economic conditions, higher client demand, and successful marketing campaigns contributed to a notable increase in new work, pushing business activity and inventories higher.
“The Purchasing Managers’ Index recorded 58.4 in December, reflecting the resilience and expansion of Saudi Arabia’s non-oil private sector,” said Naif Al-Ghaith, chief economist at Riyad Bank.
The non-oil GDP is projected to grow by over 4 percent in 2024 and 2025, with the PMI survey highlighting increased market confidence and demand. The sharp rise in new orders, including the highest increase in export orders in 17 months, underscores the sector’s strengthening foothold in international markets.
Inflationary Pressures and Workforce Adjustments
While the sector demonstrated robust growth, it faced challenges like sharp cost inflation driven by strong input demand. Material costs rose significantly in December, but businesses mitigated these pressures through moderate wage increases. The job creation easing further helped soften salary pressures, maintaining a balanced cost structure.
“Despite challenges such as sharp cost inflation, the non-oil sector has effectively navigated these pressures. Wage costs rose moderately, supported by a strategic easing in job creation,” noted Al-Ghaith.
Optimism for 2025 and Beyond
Business expectations for the future soared to a nine-month high in December, with firms optimistic about continued robust sales growth and increased activity levels in 2025. Product innovations and strengthened relationships with international clients contributed to the sharp rise in new export orders, reinforcing confidence in the sector’s global competitiveness.
“The non-oil GDP is on an upward trajectory, positioning the sector to contribute significantly to the Kingdom’s long-term economic goals,” Al-Ghaith added.
The survey emphasized that Saudi Arabia’s non-oil sector is well-aligned with Vision 2030 objectives, focusing on improving business conditions, boosting domestic and international demand, and managing inflationary pressures. These efforts set the stage for sustained growth and prosperity in the coming years.
Conclusion
Saudi Arabia’s non-oil private sector has demonstrated resilience and growth despite global economic challenges, achieving significant milestones in 2024. The strong performance in December reaffirms the Kingdom’s strategic focus on economic diversification under Vision 2030, with the non-oil sector playing a critical role in driving sustainable development and long-term financial stability.