The seasonally-adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index fell to 56.4 in May 2024, from 57.0 in April, and was the second lowest reading in 22 months, higher only than January’s low. A reading above 50 marks indicates an expansion in activity.

Growth in sales was also the least marked in just over two years. Demand expanded at a slower pace as some companies reported a slowing of market conditions and difficulties gaining new customers due to high competition.

However, the surge in demand has also led to price pressures impacting input prices and staff costs, although the increase in output prices has been observed at a slower pace, said Naif Al-Ghaith, Riyad Bank’s chief economist.

“This balancing act reflects the challenges faced by businesses in managing costs while trying to capitalise on the expanding market,” Al-Ghaith said, as reported by Zawya.

Inventory growth continued after reaching its highest on record in April 2024. However, higher stock levels led to some pullback on purchasing growth which slipped to the weakest since September 2021.

The slowdown also coincided with a drop in business confidence towards the 12-month activity outlook, bringing sentiment to its lowest level since January 2024.

“Employment levels increased in May 2024, offsetting the first decline in over two years in April. Staffing growth was mostly linked to higher workloads and efforts to reduce outstanding orders, which duly fell slightly,” the report said.

“Cost pressures eased from the beginning of the year despite a solid increase in supplier prices and a much quicker rise in employee wages,” the Riyad Bank study noted. However, selling prices rose only marginally as firms reacted to growing competitive pressures.

Talking about the Kingdom’s non-oil sector, the revenues generated from it hit 50% of the Kingdom’s GDP in 2023, the highest level ever. The non-oil economy was valued at 1.7 trillion Saudi Riyals (approximately USD 453 billion) at constant prices, driven by steady growth in exports, investment and consumer spending.

In 2023, as per the data available with the Saudi Arabia Ministry of Economy and Planning, the Kingdom’s private-sector investments expanded by a brisk 57%, reaching a record high of 959 billion Saudi Riyals (USD 254 billion) while arts and entertainment, along with real service exports grew in triple-digits to the tune of 106% and 319%, respectively.

The food sector also recorded 77% growth; transport and storage services grew 29%, health and education recorded growth of 10.8%, trade, restaurants and hotels at 7% while transport and communications increased 3.7%.

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In a budget update, the finance ministry stated that the deficit for the first nine months of 2023 was 44 billion riyals.

The largest oil exporter in the world reported a nearly USD 30 billion budget surplus in 2022 as increased oil prices caused a 31% increase in government revenue.

However, weaker prices and longer-than-expected voluntary limits to crude production in 2023 have hurt oil revenue and dragged on GDP. The government claims that these actions are a preventive measure to stabilise markets.

The third quarter saw a 14% decrease in revenue year over year to 258.5 billion riyals, with oil revenue accounting for 147 billion riyals, or 36% less than the same period in 2022.

But non-oil revenue increased by 53% to 111.5 billion riyals compared to the same period last year.

Saudi Arabia is halfway through its ‘Vision 2030′ economic reform plan, which centres the kingdom’s future development strategy around non-oil growth and an enlarged private sector.

Even though total growth is forecast to decrease considerably in 2023, non-oil growth is predicted to expand by about 6%. Higher government investment in the upcoming years is anticipated to promote non-oil GDP by boosting domestic demand.

The government’s expenditure and investment plans will benefit from the higher oil price starting in September, according to a note from Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Spending in the third quarter was 294 billion riyals, a mere 2% rise from the same time in the previous year, primarily due to a significant surge in awards.

Subsidy spending, however, was just half of the quarterly expenditure from the prior year.

Over the course of the nine-month period, overall revenue decreased by 10%, but total spending increased by 12%. USD 3.7514 riyals for USD 1.

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According to a statement released by Lumi, which is headquartered in Riyadh, the price range was established between 62 and 66 riyals per share, which would give the firm a worth of up to 3.63 billion riyals.

After a quiet summer, the Gulf initial public offering (IPO) market is expected to be put to the test by the share sale.

Seera is a Saudi travel firm that was originally known as Al Tayyar Travel Group. Lumi is an entirely owned subsidiary of Seera.

According to the prospectus for the auto rental company’s initial public offering, the company ranked itself as the third-biggest operator in the country in 2021, with a market share of approximately 7%, based on the size of its fleet.

In April 2023, anonymous sources told Reuters that Lumi had appointed Saudi Fransi Capital (1050. SE) as a financial advisor and book-runner as well as EFG Hermes as a book-runner to organize the sale of 30% of the company’s shares. (USD 1 is equivalent to 3.7510 riyals).

Meanwhile, the IPO of the Saudi drilling venture ADES, backed by the Kingdom’s Public Investment Fund (PIF), was oversubscribed within hours of announcing the price range.

ADES, which seeks to raise as much as 4.6 billion riyals (USD 1.2 billion). The IPO is set to be Saudi’s largest offering in 2023.

The range has been set at 12.5 riyals to 13.5 riyals a share, valuing the company at as much as 15.2 billion riyals, according to media reports. The oil and gas driller is selling 237.1 million new shares in the offering, while its shareholders, Public Investment Fund, ADES Investments Holding and Zamil Group Investment are reportedly selling about 101.6 million shares. The total stake being offered is 30% of the company.

The IPO got oversubscribed multiple times throughout the range and within hours of opening books, according to terms of the deal obtained by Bloomberg News.

The PIF teamed up with the major owners of then London-listed ADES to take the business private in 2021, in a deal valuing the company at about USD 516 million. ADES, whose services encompass the region of Middle East and North Africa (MENA), has grown tremendously in the last two years, as it currently has a fleet of 85 rigs and operations across seven countries, including India where three rigs will be operating in 2023, according to the ADES’ website.

The venture’s major clients include Saudi oil giant Aramco, Kuwait Oil Company and Qatar-based North Oil Company, which accounted for over 95% of ADES’ backlog as of the 2022 end.

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