Saudi Arabia: Reform Momentum Propels Non-Oil Sector to Strongest Growth in Six Months
In a clear sign of the continued strength of Saudi Arabia’s reform drive and its growing success in diversifying the economy away from oil, the Kingdom’s non-oil private sector recorded exceptional performance in September 2025.
According to the latest Riyad Bank Purchasing Managers’ Index (PMI), the non-oil economy expanded at its fastest pace in six months, supported by a solid rise in both domestic and export demand, along with stronger production and employment activity.
This strong performance reflects firm confidence in the business environment and confirms the resilience of Saudi Arabia’s recovery trajectory as the economy moves into the final quarter of the year with positive momentum and encouraging indicators.
The data coincides with the Saudi government’s preliminary 2026 budget statement, which projects non-oil activities to grow by about 5 percent by the end of 2025, driven by sustained domestic demand and improved labor market conditions.
The Riyad Bank headline PMI rose from 56.4 in August to 57.8 in September, remaining well above the neutral 50-point threshold that separates expansion from contraction. This marks the strongest improvement in business conditions for the non-oil private sector since March.
The September survey revealed significant growth in business activity and new orders, boosted by firm domestic consumption and expanding export opportunities. Companies also reported faster purchasing activity and steady job creation, while price pressures eased slightly.
The report highlighted that the rise in business activity was the main driver of growth in September, as non-oil firms ramped up output to its highest level since February. About 27 percent of respondents reported increased activity, compared with just 1 percent who saw a decline, marking the largest monthly gain in four years.
Firms also noted a strong acceleration in new orders, supported by favorable market conditions, successful marketing efforts, and an expanding client base. Combined with robust domestic demand, these factors contributed to a second consecutive monthly increase in new international business.
Rising demand encouraged companies to boost input purchases at the fastest rate in three months, leading to the largest stock accumulation since April. The report said effective inventory management became a common theme among firms seeking to ensure smooth distribution channels and prepare for future orders.
Employment levels remained solid in September, driven by stronger demand and increased workloads. Companies expanded their workforce to maintain delivery schedules, enhance productivity, and support sales operations. After two months of backlog accumulation, unfinished business levels stabilized, reflecting better operational efficiency.
Business confidence toward the year ahead improved for the second month in a row, recovering from July’s brief dip. The report attributed this optimism to expectations of stronger demand, increased sales inquiries, effective marketing campaigns, and the acquisition of new clients.
However, some caution remained. Inflation in input costs stayed above the long-term average, driven by rising wages, higher supplier prices, and general cost inflation. Selling prices continued to rise, though at the slowest pace in four months, as some firms offered discounts to protect market share.
Dr. Naif Alghaith, Chief Economist at Riyad Bank, said that non-oil private sector business conditions strengthened noticeably in September, with the PMI climbing to 57.8 — the highest reading since March — reflecting faster output growth and stronger demand.
He noted that new business inflows rose sharply, supported by local demand and export orders, particularly from Gulf Cooperation Council countries.
He further added that successful marketing campaigns boosted demand, which in turn supported production growth, revived purchasing activity, and helped firms build inventories for upcoming projects.
Alghaith underlined that improved supplier delivery times helped companies meet rising demand smoothly. “While employment growth moderated slightly, the overall pace remained strong, easing production pressures and stabilizing output levels,” he said.
