Saudi Arabia’s non-oil private sector continued its robust expansion in February 2025, driven by strong customer sales and increased activity levels. The Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) registered at 58.4, slightly down from January’s decade-high of 60.5 but still well above the 50-mark that separates growth from contraction.
Despite the slight dip in PMI, the overall performance of the non-oil sector remains strong, reflecting the Kingdom’s steady economic diversification efforts under its Vision 2030 strategy. The non-oil sector is a crucial part of Saudi Arabia’s plan to reduce its dependence on oil revenues and strengthen industries such as tourism, manufacturing, and technology.
Key Drivers of Growth
The sustained expansion in Saudi Arabia’s non-oil economy can be attributed to several factors:
1. New Orders and Strong Demand
The new orders subindex, although it declined to 65.4 in February from 71.1 in January, continues to indicate strong demand. A rise in new orders reflects increased domestic and international sales, supported by effective marketing strategies and growing consumer confidence.
The tourism industry has played a major role in driving new business opportunities. Government initiatives to promote tourism, such as visa relaxations, mega-events, and investments in cultural heritage sites, have led to a significant increase in visitor numbers. Additionally, the expansion of Saudi Arabia’s e-commerce market has contributed to higher sales volumes, as businesses tap into digital platforms to reach a wider customer base.
2. Output Expansion and Business Activity
Business output remained strong in February, recording one of the highest expansion rates since mid-2023. The steady increase in production is a direct response to rising demand and the need to meet new customer orders.
Companies across various industries, including retail, manufacturing, and construction, reported higher activity levels. Many firms also noted an improvement in operational efficiency, supported by digital transformation initiatives and government-led infrastructure projects that enhance logistics and supply chains.
Employment Trends
One of the most promising aspects of February’s economic performance was the sharp rise in employment levels. Job creation in the non-oil private sector reached its fastest pace in 16 months, as businesses expanded their workforce to meet growing demand.
The manufacturing and services sectors saw the most notable increases in hiring, indicating business confidence in sustained economic growth. Many companies also invested in training and skill development programs to equip employees with the necessary expertise for Saudi Arabia’s evolving job market.
A major factor driving employment growth is the government’s push for Saudization, which aims to increase local workforce participation in private sector jobs. The rise in employment opportunities is expected to contribute positively to consumer spending and economic stability.
Inflation and Pricing Trends
While the Saudi economy showed strong growth, businesses continued to face rising input costs, driven by higher prices of raw materials and logistics expenses. However, the pace of inflation eased slightly in February, allowing companies to keep price increases moderate.
Despite rising costs, many firms reported maintaining competitive pricing strategies to attract customers and sustain demand. Businesses also benefited from government incentives and subsidies in key sectors, which helped offset some of the cost pressures.
Business Confidence and Future Outlook
Business confidence in Saudi Arabia’s non-oil private sector remains high, reaching its strongest levels in nearly 15 months. Many companies expressed optimism about future growth prospects, driven by strong demand, ongoing government reforms, and increasing foreign investment.
The Kingdom’s Vision 2030 initiatives, such as the development of NEOM, large-scale infrastructure projects, and the expansion of renewable energy investments, are expected to further boost business confidence. Additionally, Saudi Arabia’s improved global trade partnerships and investment-friendly policies continue to attract foreign companies, adding to the overall positive economic outlook.
Conclusion
Saudi Arabia’s non-oil private sector continues to demonstrate resilience and robust growth, supported by strong demand, rising employment, and high business confidence. These trends align with the country’s long-term economic diversification goals and indicate that the private sector will play a key role in driving sustainable growth.
With steady government support, increasing investment in infrastructure, and a focus on technological advancements, the non-oil sector is expected to remain a major contributor to Saudi Arabia’s economy in the coming years. As the Kingdom continues to push forward with its Vision 2030 strategy, the future of the non-oil sector looks promising, paving the way for a more diversified and resilient economy.
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