Saudi Arabia’s non-oil economy experienced its most significant growth in more than 10 years this January, driven by an increase in new orders and dynamic business activity, according to the latest survey released on Tuesday.
Record-Breaking Expansion In Non-Oil Activity
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) jumped to 60.5 in January, up from 58.4 in December. This marks the highest reading since September 2014, signaling continued expansion as any PMI reading above 50 indicates growth.
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The surge was mainly fueled by a remarkable spike in new orders, which grew at the fastest pace since June 2011. The New Orders Index rose to 71.1 in January, a significant leap from 65.5 in December. This robust demand was attributed to strong economic conditions and a wave of new infrastructure projects, boosting both domestic and export sales.
Naif Al Ghaith, Chief Economist at Riyad Bank, noted that the growth in export orders complemented domestic demand, particularly from GCC nations, reflecting effective marketing strategies and competitive pricing.
Broad-Based Growth Across Sectors
Saudi Arabia’s non-oil sector saw a significant uptick in activity throughout January 2025, with the expansion spreading across all industries. Businesses were not only ramping up production but also hiring more staff for the ninth consecutive month to help manage increased demand and clear backlogs.
The survey revealed that 35% of companies had increased their input purchases, and delivery times were notably shorter — the most significant decrease in 10 months. With the anticipation of continued demand, firms increased their inventories, bringing stock levels to their second-highest point since 2009.
However, this surge in demand did come with its challenges. Input prices climbed at their second-fastest rate in over four years, driven by both stronger demand and external geopolitical factors. This prompted companies to increase output prices at the fastest rate in a year.
Economic Outlook And Growth Drivers
Saudi Arabia’s economy grew by 1.3% year-on-year in 2024, buoyed by the robust performance of its non-oil sector, as per preliminary data.
The growth was primarily fueled by a 4.3% increase in non-oil activities and a 2.6% rise in government services, according to the General Authority for Statistics (GASTAT). However, the oil sector faced challenges, contracting by 4.5% during the year.
This mixed performance underscores the ongoing efforts of Saudi Arabia to transition from an oil-dependent economy to one with more diverse sources of revenue.
The fourth quarter of 2024 saw a more impressive performance, with real GDP expanding by 4.4% compared to the same period in 2023, marking the highest quarterly growth in two years. This surge was largely driven by non-oil activities, which grew by 4.6%. The oil sector posted a modest growth of 3.4%, while government activities rose by 2.2%.
Saudi Arabia’s ongoing diversification efforts are clearly paying off as the country makes significant strides in reducing its reliance on oil, positioning itself for sustainable economic growth in the years to come.
