Saudi Arabia’s non-oil economy started 2025 on a high as business conditions improved substantially. This improvement was largely due to the fastest increase in total new orders since June 2011, which encouraged rapid expansions in activity and stocks.
The headline seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) rose to 60.5 in January, from 58.4 in December. Not only did the index signal a considerable expansion in operating conditions at the start of 2025, but it was also at its highest since September 2014.
“This strong performance underscores the resilience of the non-oil private sector, fueled by surging new orders and a significant rise in business output,” stated Naif Al-Ghaith PhD, chief economist at Riyad Bank.
Export sales propel growth
Four of the five sub-components of the PMI positively influenced the headline figure in January, particularly the New Orders Index, which rose over five points during the month. Notably, the index pointed to the sharpest rise in new work intakes in just over 13.5 years.
“The Output Index, reaching its highest level in 18 months, underscores strong demand conditions, with nearly 30 percent of firms reporting higher activity levels. This expansion highlights the country’s continued economic diversification efforts,” added Al-Ghaith.
Saudi Arabia’s non-oil economy witnessed a rise in export sales, which was another factor behind the sharp increase in total new orders. The latest data showed the fastest growth in foreign demand in 18 months in January.
“Nearly 45 percent of firms observed higher sales volumes, attributing this growth to positive economic conditions and the acceleration of infrastructure projects. The rise in export orders further complemented domestic demand, particularly from GCC countries, reflecting effective marketing and competitive pricing strategies,” he added.
Activity levels surge
In response, non-oil businesses across Saudi Arabia reported a notable increase in activity levels in the first month of 2025, which was also the sharpest seen in 18 months. This upturn reflected strong expansions across all the sectors monitored by the survey.
Firms across Saudi Arabia’s non-oil economy recruited additional staff for the ninth month in a row, which also helped to reduce outstanding business levels.
Despite the pressure of higher demand on businesses’ supply chains, average delivery times continued to shorten in January and to the greatest extent in 10 months. Subsequently, the volume of inputs and key components placed into inventories was sizable. The survey’s stocks of purchases index climbed to its second-highest level since data collection began in 2009.
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Cost pressures persist
The main downside to the latest results was a rise in overall cost pressures. The pace of input price inflation at non-oil firms was the second-fastest in almost 4.5 years. Firms cited higher material prices in response to stronger demand and geopolitical tensions. This led firms to increase their output prices at the quickest pace in a year.
“The outlook for the non-oil economy remains highly optimistic, with businesses expecting sustained demand growth and supportive market conditions throughout 2025,” added Al-Ghaith.
Supply chain improvements and higher purchasing activity have bolstered operational efficiency and prepared businesses for sustained growth. These indicators highlight the progress toward Saudi Arabia’s Vision 2030, as the economy diversifies and strengthens its non-oil foundations, explained Al-Ghaith.
