Growth of Saudi Arabia’s non-oil sectors falls to seven-year low

Author: PM editorial | Date: 9 Nov 2016

Purchasing managers’ index paints gloomy picture as unstable oil price hinders economy

Economic growth in Saudi Arabia’s non-oil private sector has slowed to a seven-year low, according to the purchasing managers’ index (PMI).
In the PMI, produced by IHS Markit and Emirates NBD, a country’s economy is given a score that reflects the economic confidence of managers in key industries.
Higher than 50 means there is growth, but lower than 50 means contraction. The KSA scored 53.2, down from 55.3 in September, and the lowest score since the survey began in August 2009.
Of the organisations surveyed by the PMI, 97 per cent reported no extra personnel since September. The unstable price of oil is not helping, despite the kingdom’s plans to diversify its economy. After showing signs of recovery and climbing to almost $53 at the beginning of October, it has since fallen back to $45.80.
“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, referring to the news that Saudi ministers have had to tighten their belts, after their salaries were slashed by 20 per cent and many of their perks, including housing and car allowances, were abolished or reduced.
“However, the PMI reading remains well above the neutral 50 level, indicating growth in the non-oil sector, albeit at a slower rate than last year,” added Haque.
Expats may find that hiring activity is even slower because of the government’s push for nationalisation as part of its Vision 2030. The Ministry of Civil Service recently refused to renew the contracts of 478 expat medical professionals working at King Saud University (KSU), on the grounds that the workers had spent a long time in the Kingdom and that there were qualified Saudis to replace them.