Business confidence improved in major Arab economies in May on strong growth momentum

Business confidence in Saudi Arabia and the United Arab Emirates rose above long-term average readings of the Arab world’s two biggest economies amid strong growth.

title RIYADH BANK SAUDI ARABIA PURCHASE MANAGER’S CODE The reading was 58.5, slightly lower than the 59.6 recorded in April, but above the neutral 50-mark that separates economic expansion from contraction and its long-term average of 56.9.

Sales prices in the country have risen at a very rapid pace since August 2020, depicting strong economic momentum in the country.

Seasonally adjusted S&P Global UAE Purchasing Managers’ Index The reading was 55.5 in May, which was softer than the 56.6 reading in April. It was higher than the economy’s long-term average of 54.2, as business confidence reached its strongest level since October 2021.

Saudi Arabia’s new order intake rose significantly in May, accelerating to its highest growth in more than eight-and-a-half years in April.

Businesses surveyed linked the increase in new orders to improved economic conditions, as well as an increase in travel and tourism activity and an increase in government investments.

„Thanks to the healthy state of the private sector, the country’s non-oil GDP will grow significantly in the second quarter of this year,” said Naif Al-Qaida, chief economist at Riyadh Bank.

The headline PMI reading highlighted „a number of headwinds in the domestic business sector, including tighter monetary conditions since at least 2007.”

Saudi Arabia’s economy expanded 3.9 percent in the first quarter on an annual basis, driven by growth in its non-oil sector as Saudi Arabia continues to diversify its economy and reduce its reliance on hydrocarbons.

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Compared to the same quarter in 2022, non-oil activities grew 5.8 percent in the first three months of the year, while oil activities grew 1.3 percent, estimates released by the General Commission for Statistics showed in May.

The International Monetary Fund said last month that the economies of oil-exporting countries in the MENA region would remain resilient, supported by strong momentum in non-oil economic growth, despite lower hydrocarbon revenues.

The kingdom’s economy expanded 8.7 percent last year, the highest annual growth rate among the world’s 20 largest economies, driven by higher oil prices and the strong performance of its non-oil private sector.

A drop in hydrocarbon revenues in 2022 has helped the oil exporter build financial buffers and invest in efforts to drive its non-oil economic growth.

While slow growth and interest rates in Saudi Arabia’s oil economy will create a challenging environment for some companies, „the majority of Saudi companies are in good shape and are enjoying strong business conditions,” said Mr Al-Qaida.

May’s headline reading reinforces the view that „overall economic activity is good as we enter the summer months,” he said.

Updated: June 05, 2023, 4:45 AM

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