Activity in Saudi Arabia’s non-oil private sector reached a record high, according to a purchasing managers’ index (PMI) produced by the Saudi British Bank (SABB).
The bank’s November report revealed that faster increases in output, new orders and employment – together with a slower shortening of supplier lead times – had pushed the improvement in over 400 private companies that took part in the survey.
The PMI rose to 62.2 points, from October’s 59.9.
In particular, new order receipts at the Kingdom’s non-oil private sector firms grew at their fastest rate for five months.
Data also suggested that the increased activity levels had not managed to clear work in hand.
However, there was little to celebrate on the loans side, with private sector credit growth again rising negligibly in October, according to Banque Saudi Fransi (BSF)’s most recent monetary watch note.
Lending to the private sector has been lacklustre throughout the course of the year, and BSF predicted that overall credit growth was unlikely to exceed 7.4 percent in 2010, down on its original 8 percent forecast.
BSF also reiterated its belief that Saudi banks will not witness a return to double-digit rates of loan growth before 2012-2013, when a bigger stream of project finance deals will come online.
While there is a high degree of liquidity in local commercial banks, they have generally chosen to park assets overseas or with the central bank, rather than lending in-country.
Private sector growth is vital if Saudi Arabia is to achieve its goal of diversifying the economy away from its hydrocarbons sector, and creating more jobs for its young and growing population.
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