Saudi’s non-oil private sector posts growth for first time since February

By Rahul Vaimal, Associate Editor
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Oil Production
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The non-oil private sector of Saudi Arabia posted a growth in September for the first time since February 2020, amid stronger demand after a relaxation in lockdown measures, according to  Purchasing Managers’ Index surveys compiled by IHS Markit.

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) rose to 50.7 from 48.8 in August, going above the 50 mark that separates growth from a reduction for the first time for the past seven months, prior to the coronavirus.

David Owen Image
David Owen
Economist – IHS Markit

“Business activity in the Saudi Arabia non-oil private sector ticked up in September, supported by a return to sales growth as the economy started to find its footing after the COVID-19 lockdown. In addition, the impact of a rise in VAT notably softened, after a sharp rise in prices and a dip in sales were seen in August. Cost inflation eased to just a marginal pace.”

In July, the largest oil exporter tripled its VAT to 15 percent to boost the Kingdom’s coffers which were adversely affected earlier by decreased oil prices and slashed crude production, which the experts opined will probably slow economic recovery from the pandemic hit.

The VAT imposed on consumer spending and on input costs for businesses partially made the conditions worsen in the month of August.

As per the survey, due to ease in the effect of VAT imposed, September witnessed a slow surge in input costs. However, the job markets continued to be subdued, with employment rate decreasing for the eight successive months.

Last week the Kingdom stated that in the second quarter of this year, the unemployment rate among Saudi citizens increased to a record 15.4 percent whereas the economy fell by 7 percent.

The Saudi economy still has “some way to go to fully recover,” said Owen. The production continues lower than standard level and job losses are still increasing, though at a slower rate. Companies need a constant rise in sales to support a strong end to the year, he added.