Saudi Arabia’s non-oil private sector showed sustained growth in December, signaling strong economic momentum as the Kingdom heads into 2025. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) registered a solid 58.4 last month, although slightly down from November’s 17-month high of 59.0. Despite the dip, the PMI remains firmly above the neutral 50.0 threshold, indicating continued expansion in the non-oil economy.
December’s growth was primarily driven by robust domestic demand and a marked increase in export activity. The new orders subindex surged to 65.5 in December, up from 63.4 in November, reflecting the fastest pace of growth in 2024. This uptick marks the fifth consecutive month of accelerating orders, highlighting the growing confidence of businesses in Saudi Arabia’s economic prospects.
Naif Al-Ghaith, Chief Economist at Riyad Bank, commented on the performance, noting, “Saudi Arabia’s non-oil private sector ended 2024 on a high note, reflecting the successful strides made under Vision 2030,” the Kingdom’s ambitious program to diversify its economy beyond oil dependency. The Vision 2030 framework continues to gain traction, with substantial investments in key sectors driving private sector expansion.
Despite positive demand dynamics, businesses faced rising input costs due to an increased demand for materials, which exerted inflationary pressures. However, easing wage inflation provided some relief, allowing companies to manage costs more effectively. Business expectations for the future also remained optimistic, reaching a nine-month high in December, with firms confident about continued growth into 2025.
Overall, the non-oil sector in Saudi Arabia is projected to grow by more than 4% in both 2024 and 2025, driven by favorable business conditions and ongoing investments aligned with Vision 2030 goals. With strategic government spending focused on key infrastructure projects and the recent announcement that Saudi Arabia will host the 2034 FIFA World Cup, the outlook for the non-oil economy remains highly positive.
Economic Analysis
The continued growth in Saudi Arabia’s non-oil private sector signals the country’s successful economic diversification efforts under Vision 2030. Strong demand, both domestically and in exports, suggests that the country’s push to develop new industries is gaining traction. However, input cost inflation remains a challenge, particularly in raw materials, which could constrain profit margins for some sectors. Despite this, the easing of wage inflation offers a buffer to businesses, improving their ability to manage rising costs. As the government accelerates infrastructure spending and diversifies investments, the non-oil economy is likely to continue growing, providing a resilient buffer against fluctuations in oil prices. This positive momentum positions Saudi Arabia as a key economic hub in the region for the foreseeable future.
