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Press Dossier    By Date   04/04/2024 Saudi Arabia leads March PMI rankings among GCC nations

Arab News, Thu, Apr 04, 2024 | Ramadan 25, 1445

​​Saudi Arabia leads March PMI rankings among GCC nations

Saudi Arabia: Saudi Arabia’s non-oil private sector saw steady growth in March, with output accelerating to a six-month high, as reflected by the Kingdom’s Purchasing Managers’ Index.  

The economic index reached 57 in March, showing a slight decrease from 57.2 in February, according to a report by the Riyad Bank Saudi Arabia PMI by S&P Global.  

Any PMI reading above 50 indicates growth in the non-oil sector, while readings below that signal contraction.  

Saudi Arabia’s PMI in March surpassed that of other Gulf Cooperation Council countries such as the UAE, Egypt, and Kuwait, indicating that the Kingdom’s non-oil sector growth is in line with the goals outlined in Vision 2030. 

Strengthening the non-oil sector is crucial for Saudi Arabia as the Kingdom steadily diversifies its economy away from oil. 

The US-based firm reported that operating conditions in Saudi Arabia’s non-oil private sector exhibited robust improvement at the end of the first quarter, with companies emphasizing significant increases in order books and new customers.  

Naif Al-Ghaith, chief economist at Riyad Bank, said: “The PMI for Saudi Arabia showcased a notable upswing as the non-oil economy exhibited significant expansion in the most recent period. This expansion was primarily fueled by a surge in demand across various sectors, indicating a robust economic performance.”   

He added: “Business activity experienced a substantial uptick, marking the most significant growth in six months. The positive momentum also prompted accelerated purchasing activities and additional hiring, underscoring a buoyant market outlook.”   

According to the report, the rise in output levels among non-oil private sector firms was driven by robust new orders and strong demand conditions. 

Similarly, new orders placed at non-oil firms rose sharply in March, with the expansion rate accelerating for the second month in a row. 

The survey also revealed that demand from foreign customers increased in March. 

The report indicated rising optimism among businesses in the non-oil sector for the coming 12 months, driven by anticipations of growth in demand. 

“The surge in orders and customer acquisition not only bolstered current operations but also laid the foundation for continued expansion and potential business growth in the foreseeable future,” noted Al-Ghaith.  

He added: “Moreover, the concurrent easing of cost pressures, particularly in terms of wages, provided companies with greater flexibility and resources to invest in their operations and workforce, fostering a conducive environment for sustained economic progress and development in Saudi Arabia.”  

The report further noted that private sector firms in the Kingdom witnessed a decrease in cost inflation for the second consecutive month. 

UAE maintains growth 

Business conditions in the UAE non-oil private sector strengthened sharply in March, with optimism reaching its highest point in six months, as indicated by a survey.  

According to the latest S&P Global Purchasing Managers’ Index, the UAE’s PMI reached 56.9 in March, slightly lower than February’s 57.1 but well above the 50 mark denoting expansion in activity.  

David Owen, a senior economist at S&P Global Market Intelligence, said: “The overall picture for the UAE non-oil private sector remained rosy at the end of the first quarter. The latest PMI reading of 56.9 in March signaled a robust upturn in business conditions, with order book inflows and activity levels still growing sharply.”     

The US-based firm revealed that businesses in the Emirates faced significant pressure on their workloads, with reports of administrative delays and increased supply constraints due to the Red Sea shipping crisis.   

As a result, the data signaled the joint-fastest accumulation of backlogs of work in the survey’s 15-year history.  

“While the surge in backlogs is concerning as an indicator of business health, the pent-up demand should support activity growth for even longer once these issues are resolved,” added Owen.   

According to the report, strong demand remained a key feature of growth in the non-oil economy, as surveyed firms witnessed another sharp uplift in new order volumes. 

Moreover, the rate of expansion picked up from February’s six-month low, though it remained slightly softer than those recorded around the turn of the year. 

Additionally, optimism toward future business activity among non-oil firms in the UAE rose to the second-strongest level in four years. 

“While the surge in backlogs is concerning as an indicator of business health, the pent-up demand should support activity growth for even longer once these issues are resolved,” the economist added.  

Meanwhile, the Central Bank of the UAE revised down its economic growth projection, citing the decision of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. 

CBUAE now expects the country’s economy to expand by 4.2 percent in 2024, down from an earlier estimate of 5.7 percent. 

Kuwait records spike in new orders  

Kuwait, on the other hand, saw its fastest rise in new orders since 2020 in March, driving the PMI to 53.2, up from 52.7 in February.  

According to the report, rates of expansion in output and new orders quickened, while business confidence improved, although job growth remained only fractional. 

Andrew Harker, economic director at S&P Global Market Intelligence, stated that non-oil firms in Kuwait are currently experiencing a strong growth phase, with competitive pricing proving successful in attracting increasing numbers of customers. 

Due to the marginal rise in job growth, backlogs of work continued to build, with outstanding business accumulating for 14 consecutive months. 

“If new orders continue to flow in as they have been doing, firms will likely need to take on additional staff to prevent delays in the completion of projects,” said Harker.  

Qatar economy

Qatar witnessed a marginal decline in its PMI to 50.6 in March from 51 in February, indicating a sustained improvement in business conditions in the non-energy private sector economy. 

“The PMI remained firmly in stable territory in March, reflecting further growth in output, new orders and employment in the Qatari non-energy economy,” said Yousuf Mohamed Al-Jaida, CEO of Qatar Financial Center Authority. 

He added that in the first quarter of 2024, the headline index has trended in line with the average for the fourth quarter of 2023, indicating sustained economic growth. 

According to a press statement, in March, demand for goods and services in Qatar’s non-energy economy continued to expand, with local firms also extending their workforces, marking over a year of consecutive growth. 

Egypt sees fall in business activity  

Meanwhile, Egypt’s non-oil private sector continued to deteriorate in March, according to another report by S&P Global. The PMI reached 47.6, slightly higher than February’s 47.1, but remained below the expansion mark of 50. 

According to the report, non-oil private sector activities declined sharply in March as weak order books and elevated inflationary pressures continued to impact business output and confidence. 

“Businesses in Egypt’s non-oil private sector continued to come under pressure from the country’s recent currency crisis in March,” said Owen.  

He added that February’s PMI results had indicated a considerable downturn in business activity, and “March was little different, except for a modest reduction in the rate of decline.” 

Even though firms expressed positivity about the next 12 months, there were some concerns that economic headwinds might further reduce sales. 

“PMI survey data on prices suggests this may be the case, with rates of input cost and output price inflation slowing to three-month lows,” said Owen. 

On the other hand, he added that firms are still lacking confidence that activity will grow over the year ahead, suggesting that economic risks may take more time to disappear.

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