Business activity in the non-oil private sector economies of Saudi Arabia and the UAE continued to improve in July, with a strong increase in output, new orders and employment despite a rise in inflationary pressures.
Saudi Arabia’s economy grew by 11.8 per cent in the second quarter of 2022, with oil-related economic activity in the kingdom rising 23.1 per cent annually.
Non-oil economic activity climbed 5.4 per cent during the period, supporting the growth of the Arab world’s largest economy, according to flash estimates released by the kingdom’s General Authority for Statistics (Gastat) last week.
The International Monetary Fund estimates that the Saudi economy will expand by 7.4 per cent this year, driven by higher oil revenue, a projected improvement in the country's non-oil gross domestic product and its efforts to diversify the economy.
The World Bank estimates that the country's economy will grow 7 per cent this year while Jadwa Investment expects the economy to expand 7.7 per cent in 2022.
Although the expansion in the kingdom's non-oil businesses activity was slightly softer than at the end of the second quarter, five times as many companies saw an increase in activity month-on-month compared with those that recorded a decline.
Improving market conditions at home and strengthening new export orders that rose at the sharpest pace since November helped the growth momentum at the beginning of the third quarter.
With new orders increasing rapidly, businesses were encouraged to raise employment levels further in July, extending the current period of growth to four months. The pace of job creation in the kingdom was the quickest since September 2019.
Backlogs of work also decreased at the start of the third quarter, with the sharpest rate of decline in just over two years. Efforts to complete unfinished orders were helped by a rise in buying activity, as businesses expanded inventories to cope with stronger demand.
Inflation in Saudi Arabia was 2.3 per cent higher in June on an annual basis, Riyadh-based Jadwa Investment said.
Inflation in the UAE is also relatively low. It remained at 3.3 per cent in the first quarter and is projected to average 2.7 per cent for 2022, according to the Central Bank of the UAE.
The UAE PMI Index posted 55.4 in July, up from 54.8 in June, the joint-quickest rise in business activity this year as it stayed above the long-run average of the survey. Panelists indicated that favorable demand conditions, competitive pricing, marketing efforts and expanded clientele drove new business intakes higher in July.
International demand for UAE non-oil output also increased at the start of the third quarter with the rate of expansion broadly similar to that seen in June. Businesses also scaled up output in July at the joint-fastest rate in 2022.
The UAE economy is set to expand by an annual 5.4 per cent this year, driven by the country’s success in containing the health and economic impact of the pandemic, according to the Central Bank.
The IMF projects that the UAE economy will grow 4.2 per cent this year while Japan's largest lender MUFG expects it to grow 4.9 per cent.
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