Stock - Saudi economy / Riyadh skyline
New projects are being added onto the already red-hot Saudi real estate and tourism sectors. Image Credit: Bloomberg

Dubai: Saudi businesses continue to battle high inflation, with the pace of increase at its highest in 3 years, led primarily by wage gains. The private sector saw staff levels rise at ‘joint-fastest’ rate since January 2018.

Government incentives continue to drive Saudi activity, with businesses reciprocating by hiring new – or raising salaries for job retention.

“While a slower oil economy and rising interest rates will create a challenging environment for some establishments, most Saudi firms are in good shape and experiencing robust business conditions,” said Naif Al-Ghaith, Chief Economist at Riyad Bank,

“May results show a small retracement from the strong April outcome, reinforcing the view that overall economic activity is holding up well as we enter the summer months.”

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Saudi May PMI

The May PMI was 58.5, down from 59.6 in April, brought about by declines in the index's two largest components (new orders and output). But the index remains well above the 50 growth threshold and 'higher than its long-run average of 56.9'.

“The Kingdom’s non-oil GDP is likely to have notably grown in the second quarter this year thanks to the healthy state of the private sector," said Al-Ghaith. "The Riyad Bank PMI highlights the ongoing resilience of the domestic business sector to a number of headwinds, including the tightest monetary conditions since at least 2007.

“New orders grew considerably, reflecting a strong demand growth, particularly in tourism activities and construction. This led to the joint-fastest rate of job creation since 2018, which allowed firms to work through backlogs at a quicker pace this month."