Saudi Arabia’s Non-Oil Private Sector Sees Fastest Growth in a Decade

Saudi Arabia’s non-oil private sector is experiencing its strongest expansion in a decade, with the Kingdom’s Purchasing Managers’ Index (PMI) surging to 60.5 in January, according to a new report by S&P Global. The seasonally adjusted Riyad Bank PMI jumped from 58.4 in December, marking its highest level in ten years and signaling robust growth at the start of 2025.

The rise comes as Saudi Arabia intensifies its efforts to diversify its economy under Vision 2030, with the non-oil sector now contributing 52 percent of the Kingdom’s gross domestic product (GDP), according to Minister of Economy and Planning Faisal Al-Ibrahim. Recent data also shows non-oil exports rising by 19.7 percent year-on-year in November to reach SR26.92 billion ($7.18 billion).

Strong Demand Drives Growth

The sharp increase in PMI reflects strong demand conditions, with new orders growing at their fastest pace since June 2011. Nearly 45 percent of businesses reported higher sales, fueled by favorable economic conditions, rising infrastructure investments, and government-backed diversification initiatives.

“This strong performance underscores the resilience of the non-oil private sector,” said Naif Al-Ghaith, chief economist at Riyad Bank. With the Output Index at its highest level in 18 months, almost 30 percent of firms reported higher activity levels, driven by a surge in new orders and business output.

Al-Ghaith also highlighted rising export demand, particularly from Gulf Cooperation Council (GCC) countries, as a sign of effective marketing and competitive pricing strategies.

Employment Growth and Supply Chain Resilience

The hiring trend remained positive for the ninth consecutive month, as businesses expanded their workforce to keep up with rising demand. This helped ease backlogs of work, further improving operational efficiency.

“Employment trends reflect growing confidence in the economy, with companies continuing to hire to meet demand. Supply chain improvements and higher purchasing activity have also contributed to sustained growth,” added Al-Ghaith.

Despite the rapid expansion, supply chain conditions improved, with delivery times reaching their best levels in 10 months. Businesses also increased inventory levels, hitting the second-highest point in survey history.

Inflationary Pressures and Future Outlook

While the non-oil sector showed strong growth, input costs continued to rise due to higher raw material prices and geopolitical uncertainties. Inflation reached its second-highest level in four-and-a-half years, leading many businesses to pass on costs to consumers, with output prices rising at the fastest pace in a year.

Despite inflationary pressures, businesses remain optimistic about the outlook for 2025, anticipating sustained growth driven by infrastructure investments, strong market conditions, and rising domestic and international demand.

“These indicators highlight the success of Saudi Arabia’s Vision 2030, as the economy diversifies and strengthens its non-oil foundations,” concluded Al-Ghaith.

With non-oil expansion outpacing other regional economies, including Egypt and Kuwait, Saudi Arabia is positioning itself as a key economic powerhouse in the Middle East.