New orders at Saudi small and medium-sized enterprises grew at their fastest pace in seven months in September, keeping the sector in expansion for a second straight quarter. The Riyad Bank Saudi Arabia SME Purchasing Managers’ Index, compiled by S&P Global, eased to 53.8 from 53.9 in August, still well above the 50 mark that separates growth from contraction.
The reading came despite a regional conflict that has disrupted shipping and weighed on business confidence. Naif Al-Ghaith, chief economist at Riyad Bank, said the results sent an “encouraging signal on the underlying strength and resilience” of the sector, and noted that the index averaged 52.7 in the third quarter, up from 51.4 in the second. Saudi Arabia wants SMEs to account for 35 per cent of GDP under Vision 2030, compared with around 20 per cent now.
Firms linked the jump in new work to a steady recovery in sales enquiries and firm demand at home, although some cited geopolitical tension and high costs as drags. Output kept growing but slowed from August’s eight-month high. Employment rose slightly, with the pace of hiring the strongest since March. Purchasing of inputs climbed at the sharpest rate in seven months, and supplier delivery times shortened again as companies spread their supply chains. Input prices rose by a strong margin, which firms put down to higher raw material and transport costs. Because the survey covers only small and medium-sized firms, it gives a separate reading on the part of the economy the government most wants to expand.
Ryan Alnesayan, the Arthur D. Little partner responsible for the Middle East and Saudi Arabia, said current orders only count if they last. “The real measure is how much of today’s demand becomes lasting growth,” he said. He argued that large projects could give SMEs a bigger place in the kingdom’s supply chains, but only for firms that invest in capacity, skills and productivity so they can deliver contracts reliably and compete for larger ones.
Looking ahead, SMEs remained optimistic about the next 12 months, pointing to strong sales pipelines and hopes for greater regional stability. Confidence did slip from August, however, and stayed below the recent high recorded in June. Al-Ghaith said the combined gains in new business, jobs and purchasing showed constructive momentum in the private sector, and that an expanding SME base would keep supporting job creation and a broader non-oil economy.
