Saudi Arabia's non-oil private sector economy in January recorded the strongest expansion in more than a decade, buoyed by a surge in new orders, as the kingdom continues to diversify its economy away from hydrocarbons.
The headline Riyad Bank purchasing managers' index climbed to 60.5 last month, from 58.4 in December, well above the 50-point mark that separates expansion from contraction.
“This strong performance underscores the resilience of the non-oil private sector, fuelled by surging new orders and a significant rise in business output,” Naif Al-Ghaith, chief economist at Riyad Bank, said. “Nearly 45 per cent of firms observed higher sales volumes, attributing this growth to positive economic conditions and the acceleration of infrastructure projects.”
The rise in export orders further complemented domestic demand, particularly from the Gulf countries, reflecting effective marketing and competitive pricing strategies employed by businesses in the Arab world's largest economy, Mr Al-Ghaith added.
Economic overhaul
Saudi Arabia, the world's biggest oil exporter, is overhauling its economy under its Vision 2030 diversification agenda. It aims to reduce its dependence on oil, encourage domestic industries and create more jobs for its citizens. Developing non-oil industries such as aviation, tourism, technology, real estate and infrastructure projects is one of the central planks of Riyadh's diversification strategy.
The kingdom has also introduced sweeping fiscal, social and economic reforms to attract foreign investment and support the private sector to boost its economic contribution.
Saudi Arabia’s economy grew at the fastest pace since 2022 during the fourth quarter of last year, buoyed by expansion of the oil and non-oil sectors.
The country’s gross domestic product grew by 4.4 per cent on an annual basis during the three-month period to the end of December 2024 “supported by the growth of key economic activities”, according to its General Authority for Statistics. The rise is higher than the 2.8 per cent year-on-year GDP growth recorded in the third quarter of 2024.
Saudi Arabia's non-oil sector last month recorded the fastest increase in total new orders in 13 and a half years, which led to rapid expansion in activity and stocks, according to Riyad Bank survey data.
The sharp rise in new orders was due to “accommodative economic conditions” that supported a strong boost to customer orders, while some companies benefitted from new infrastructure projects, the report said.
Export sales also helped to boost new orders, with the latest data pointing to the fastest growth in foreign demand for 18 months in January. Some companies said increased marketing, competitive prices and better relations with international customers had driven up sales.
Year-ahead optimism
Businesses surveyed also reported an increase in activity in January, the sharpest for 18 months, driven by higher demand. The upturn reflected expansion across the sector, leading companies to hire more staff for the ninth consecutive month.
The latest survey data also showed the strongest year-ahead forecasts for business activity in 10 months.
“This came despite another uptick in input price pressures, which firms mainly attributed to increased material prices amid geopolitical tensions,” the report said.
The outlook for the kingdom's non-oil economy remains optimistic and businesses expect sustained demand growth and supportive market conditions throughout 2025. Mr Al-Ghaith said.
Employment trends underline the “positive sentiment”, while supply chain improvements and higher purchasing activity have improved efficiencies, preparing businesses for sustained growth.
“These indicators highlight the progress being made toward Saudi Arabia’s Vision 2030, as the economy diversifies and strengthens its non-oil foundations,” he said.
Egypt swings to growth
Meanwhile, Egypt's non-oil private sector began 2025 by swinging back to growth territory, recording its fastest expansion in more than four years as output and sales volumes increased while costs fell to an eight-month low.
The headline seasonally adjusted S&P Global Egypt Purchasing Managers’ Index rose to 50.7 in January, from 48.1 in December, reaching a 50-month high in the first month of the year.
"The ceasefire deal between Israel and Hamas likely added confidence to markets in January," David Owen, senior economist at S&P Global Market Intelligence, said.
Improved domestic market conditions drove January sales higher, supported by easing inflationary pressure, which helped to slow the rate of output price inflation to its lowest in four-and-a-half years. New orders, particularly in the manufacturing, construction and wholesale and retail sectors also rose.
Despite business conditions improving, companies were "restrained" in their outlook of future activity, with expectations slipping from December to a historically low level in January, according to the survey report.
"Business expectations for the next 12 months remain subdued, showing that firms are still uncertain about economic stability over the longer term," Mr Owen said.
