RIYADH: Saudi Arabia’s non-oil private sector remained firmly in expansion territory in February, supported by strong domestic demand and steady project approvals, according to the latest Riyad Bank Purchasing Managers’ Index.
The report, compiled by S&P Global, stood at 56.1 in February, slightly down from 56.3 in January in what was a nine-month low.
A PMI reading above 50 signals expansion, while a figure below 50 indicates contraction.
Developing a robust non-oil ecosystem remains central to Saudi Arabia’s Vision 2030 strategy, as the Kingdom continues efforts to diversify its economy and reduce reliance on crude revenues.
Iran’s retaliatory strikes across the Gulf since Feb. 28 have caused the biggest business disruption in the region since the COVID-19 pandemic, leading to airport closures, halted port operations, and sharp swings in financial markets.
Naif Al-Ghaith, chief economist at Riyad Bank, said: “Saudi Arabia’s non-oil private sector sustained its expansionary trajectory with a PMI reading of 56.1 in February, though the pace of output growth eased to its lowest level since last August.”
He added: “This performance was driven by robust domestic demand and a steady flow of new project approvals. Despite the moderation in momentum, the sector remains firmly in growth territory, supported by seven months of rising international sales and an improving volume of new orders.”
In February, the General Authority for Statistics reported that Saudi Arabia’s real gross domestic product expanded by 4.5 percent year on year in 2025, driven by strong growth in both oil and non-oil activities.
It added that non-oil activities in the Kingdom grew by 4.9 percent in 2025 compared with the previous year.
Commenting on the latest PMI report, Sami Abdul Hadi, co-founder of Vault, told Arab News that domestic consumption, a steady pipeline of project approvals and continued hiring are key factors supporting momentum in the Kingdom’s non-oil private sector.
“The composition of growth reflects the ongoing execution of Vision 2030. Activity is broad-based across wholesale and retail trade, tourism, financial services, construction, and business services,” said Hadi.
He added that public and private capital expenditure, rising foreign direct investment and accelerating digitization of commerce are helping entrench non-oil sectors as the primary engine of real gross domestic product growth in the Kingdom.
Although output growth slowed to a six-month low, it remained substantial. Survey respondents frequently cited improved customer demand and new project approvals as key drivers. However, some noted that competitive pressures across markets weighed on growth.
Order books expanded during the month, largely reflecting stronger domestic sales.
Panelists also attributed higher new work volumes to supportive government policies, improved customer spending, increased sales and marketing efforts, digital business development, and collaborative projects with clients.
“A key highlight of the February results was the sizeable increase in employment, as firms expanded their workforce to manage higher workloads and new business inflows,” said Al-Ghaith.
He added that the acceleration in hiring signals confidence in near-term demand, even as overall output growth moderated.
Vijay Valecha, chief investment officer at Century Financial, said policy measures aimed at attracting foreign direct investment, easing foreign ownership rules, expanding capital markets and strengthening private-sector participation are accelerating growth in the Kingdom’s non-oil sector.
“By systematically diversifying the economy away from oil, the authorities have created a more sustainable and stronger growth trajectory. Under this mission, construction, technology, transport and logistics services, along with manufacturing and other emerging sectors, now account for a growing share of activity and employment,” said Valecha.
He added that regulatory and business-environment reforms — including the easing of foreign investment rules and the digitalization of licensing and customs procedures — have lowered barriers to entry, making it easier for firms to expand and hire, thereby supporting non-oil growth.
“The recent PMI readings thus signal that reforms are not just a one-off stimulus. They are promoting a more diversified, demand-driven growth base which can withstand cyclical and external shocks,” said Valecha.
S&P Global added that supply chain performance improved, with delivery times shortening amid better coordination and operational efficiencies.
“Overall, February’s results point to an economy that remains strong but is moving onto a more sustainable balance. Growth has moderated, yet demand and hiring activity continue to anchor the expansion,” said Al-Ghaith.
He added: “The broader trend remains positive, with businesses actively adjusting their capacity while maintaining a high degree of confidence in underlying market conditions.”
Looking ahead, survey participants expressed optimism for the next 12 months, citing new client projects, stronger demand and improving domestic economic conditions as key supporting factors.
However, JPMorgan on March 2 cut its 2026 non-oil growth forecast for the Gulf by 0.3 percentage points and lowered its projection for Saudi Arabia by 0.2 percentage points, cautioning that the estimates are preliminary and subject to high uncertainty.
Echoing similar views, Valecha said ongoing tensions in the Middle East could weaken business confidence in the Kingdom and weigh on foreign direct investment inflows.
“It is well known that prolonged geopolitical instability can discourage foreign direct investment. In these scenarios, even a well-framed policy like Vision 2030 can face risk premiums on capital inflows. This is due to investors perceiving high risk relative to expected returns,” said the Century Financial official.
Hadi said the outlook for Saudi Arabia’s non-oil sector remains positive, supported by regulatory reform, rising labor-market participation, infrastructure development and credit growth.
However, he warned that regional conflicts could introduce volatility through potential disruptions to travel, logistics and investor confidence.
“However, elevated oil revenues during periods of geopolitical tension can provide a fiscal buffer that sustains government spending and investment pipelines, partially offsetting external shocks,” said Hadi.
