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The kingdom’s non-oil economy, the engine of job creation, grew an annual 6.2% during the fourth quarter of last year. Image Credit: Bloomberg

Confidence among businesses in Saudi Arabia’s non-oil sector rose to a two-year high in January, as firms reported strong new order growth and started to see improvements in supply chains and softening inflation.

New order growth rose compared to December and was the second highest level in the past 16 months, according to a survey of purchasing managers compiled by S&P Global. Foreign demand also increased rapidly and to a greater degree than at the end of 2022.

The Riyad Bank Saudi PMI rose to 58.2 from 56.9 in December, well above the 50-mark separating growth from contraction. Last month’s figure was the second-highest recorded since September 2021 after November’s more than seven-year high.

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It’s the latest sign that last year’s economic boom is continuing even as oil prices fall from recent highs. Overall growth was an estimated 8.7 per cent last year, Saudi official projections showed, making it the fastest growing major economy.

The positive sentiment was “driven by the ongoing improvement in the business environment, private-sector employment, and increased foreign investment with governance and labor market reform”, said Naif Al Ghaith, chief economist at Riyad Bank.

The kingdom’s non-oil economy, the engine of job creation, grew an annual 6.2 per cent during the fourth quarter of last year, the highest level in more than a year.

“Saudi Arabia is continuing its strong performance and outperformed the global economic trends for activity and demand,” Al Ghaith said.

The world’s largest oil exporter has so far been mostly shielded from global economic woes as high crude prices are putting the government on track to record a second year of budget surplus. That’s helping the government accelerate investments in new industries intended to wean it off a reliance on oil sales.

The rise in output prices was the softest in nearly a year, despite the growth in new orders, the report showed. Job creation slowed from December’s near five-year high.