Saudi’s non-oil private sector demonstrated in September 2023 a rebound, with both business activity and new businesses experiencing stronger growth compared to August. This positive trend was revealed in the purchasing managers’ index data released on Tuesday.
Despite a decline in procurement, inventory, and employment growth, companies displayed improved confidence in future activity. The adjusted Riyad Bank Saudi Arabia Purchasing Manager’s Index (PMI) rose to 57.2 in September, surpassing August’s figure of 56.6, which had been the lowest since September 2022. The index comfortably exceeded the growth level of 50 and once again surpassed its long-term average of 56.9.
Furthermore, total output rebounded from a 19-month low in August, with the sub-index rising to 62.8 in September, up from 59.1 the previous month. This increase was primarily driven by a rapid expansion in new business.
Lower production prices contributed to the recovery in sales growth observed in September, as indicated by Riyad Bank’s index data. Companies implemented price reductions to remain competitive in the market. Despite a notable increase in production supply prices, sales prices declined, putting pressure on profit margins.
“The non-oil economy continues its growth despite the challenges arising from the current monetary policy conditions,” Naif Al-Ghaith, Riyad Bank’s chief economist said.
“Our view is that non-oil GDP will continue to support growth and remain above 5.5 percent for 2023 supported by the ongoing reforms under the Vision 2030,” he added.
The latest forecasts from the Saudi Ministry of Finance anticipate a growth rate of 5.9 percent for non-oil activities in the current year.
Decreased unemployment, increased Saudi private sector employment
The positive growth observed in the private sector has had a direct impact on the Saudi labor market. During Q2 2023, there was a notable increase in the participation of Saudi citizens, surpassing previous annual quarters. As a result, the number of employees in private sector enterprises reached 2.2 million, contributing to lower unemployment rates and a higher representation of Saudis in the private sector workforce.
The General Authority for Statistics in Saudi recently disclosed that the unemployment rate among Saudis declined to 8.3 percent in Q2 2023, down from 9.7 percent during the same period last year. This positive trend brings the rate closer to the government’s Vision 2030 targets of 7 percent.
The National Labour Observatory of the Human Resources Development Fund (HRDF), known as HADAF, reported a significant increase of around 210,000 Saudi employees compared to the corresponding quarter of the previous year. This translates to an average quarterly growth of approximately 42,000 employees, leading up to the end of the second quarter of 2023.
The rise in the private sector workforce is a result of favorable growth rates in the Saudi economy. This has led to an expansion of the overall labor market, increased demand for employment, and improved productivity rates. The National Labour Observatory recently released a resettlement report for the second quarter of this year, which assesses changes in the labor market and job settlement rates within private sector enterprises.
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Saudization rate currently stands at 22 percent
Furthermore, HADAF offers a comprehensive analysis of settlement rate performance, including breakdowns by economic activities and administrative areas. It compares rates from the second quarter of the current year with the previous quarter and the corresponding period of 2022. The report also highlights the net growth of job opportunities for citizens.
According to the report, there has been a significant increase in the number of citizen employees, with male workers reaching 1.3 million and female private sector employees totaling around 900,000 by the end of the second quarter. This brings the overall settlement rate to 22.3 percent. The Eastern Region demonstrates the highest settlement rate at 27 percent, followed by Mecca at 24 percent, and Riyadh and Medina both at 21 percent in the second quarter of 2023.
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