Exports help Saudi non-oil sector hit 10-month high

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• China is largest market
• Chemicals account for 49.2%
• Employment up for fifth successive month

A sharp surge in exports in the second quarter of 2022 has helped business activity in Saudi Arabia’s non-oil sector rise to a ten-month high, boosting employment and sentiment for the year ahead.

The General Authority for Statistics reported that exports increased by 85.1 percent year-on-year in Q2 to SAR 429.8 billion ($114.61 billion).

Oil accounted for 80 percent of exports, up from 71.7 percent in Q2 2021.

Within the non-oil sector, exports (including re-exports) increased by 31 percent year-on-year to SAR 86.2 billion.

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The biggest export sectors were chemicals, which rose 49.2 percent year-on-year during the quarter, followed by plastics and rubber products, which rose 12.5 percent year-on-year.

China was Saudi Arabia’s biggest export market, accounting for SAR 63.4 billion, or 14.8 percent, of total exports. This was followed by India, Japan, South Korea, the US, the UAE, Egypt, Taiwan, Bahrain, and Singapore.

As a result the latest S&P Global Saudi Arabia Purchase Managers Index (PMI) showed that non-oil business activity rose to 57.7 in August, up from 56.3 in July and the highest level since October 2021.

Any score above 50 indicates economic expansion and any score below is a warning of contraction.

“The Saudi Arabia PMI pointed to added resilience in the non-oil economy during August, as business activity and sales continued to rise sharply despite reports of mounting global economic distress,” David Owen, economist at S&P Global Market Intelligence, said.

“Total new orders rose at the quickest pace since October last year, driven by improving client demand, higher exports, and a broad recovery in economic conditions since the pandemic.

“Businesses were also helped by a slight softening of input price pressures, allowing some firms to cut output charges in a bid to attract higher sales.”

In terms of specific sectors, the PMI said new work rose the fastest among wholesale and retail firms, with expansions also recorded in manufacturing, construction and services.

The increased demand for exports has led to employment levels rising for the fifth successive month in August. However, with backlogs now starting to be cleared, the report predicted that job creation would start to slow in the coming months.

The most recent monthly report by the Saudi Central Bank (SAMA) found that the value of exports financed through local commercial banks amounted to SAR16.283 billion in the second quarter of 2022, compared to SAR15.357 billion in Q2 2021 and SAR12.551 billion in Q2 2020.

Yet it was down from a quarterly peak of SAR29.532 billion in Q4 2021.

The PMI report found that sentiment was high among the non-oil business sector, despite mounting global economic pressures. 

“While slipping to a three-month low, the degree of optimism was one of the strongest seen over the last one-and-a-half years,” the report said.