Economic growth in Saudi Arabia’s non-oil private sector slowed again last month as the purchasing managers’ index (PMI) fell to its lowest level in seven years on the back of austerity measures.
The Saudi PMI fell to its lowest level since the survey first began in 2009 as global falls in the price of oil and a biting austerity plan stifled growth.
The index, which measures the economic confidence of business managers in the manufacturing and services industries, dropped to a record low of 53.2 last month from 55.3 in September. A figure above 50 means businesses in the country are expanding, while below 50 signals a contraction. The index is sponsored by Emirates NBD and produced by data company IHS Markit.
At the end of September, the Saudi government issued a royal decree reducing ministers’ salaries by 20 per cent and housing and car allowances for members of the advisory Shura Council by 15 per cent. Lower ranking civil servants had wage increases suspended and overtime and annual leave capped.
The move is part of the government’s National Transformation Plan unveiled earlier this year, which aims to reduce public sector wages to 40 per cent of spending by 2020 from 45 per cent in June.
“The decline in the Purchasing Managers’ Index in October was not unexpected, given the additional fiscal measures that came into effect last month including public sector wage cuts,” said Khatija Haque, head of Mena research at Emirates NBD, based in Dubai.
According to the index, which is regarded as one of the earliest indicators of an economy’s performance, both output and new orders rose more slowly, while jobs’ growth neared stagnation. The rate of expansion in purchasing activity held up slightly better, as firms acted on forecasts of stronger sales growth. Those projections may have been linked to an expected upturn in demand following price discounting. Charges fell for the second successive month amid muted cost pressures.
Managers reported a slowdown in both the amount of work that they did and the amount of new business they won – both of which rose to the least extent since the survey began.
The number of new jobs created also slumped to a six-month low with the vast majority of surveyed companies (97 per cent) reporting no change since September.
lbarnard@thenational.ae
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