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Saudi private sector sees worst month in nine years

Saudi private sector sees worst month in nine years

Emirates NBD’s purchasing managers’ index recorded record lows in a number of categories for April

Saudi Arabia’s non-oil private sector had another dismal month in April, with the slowest improvement in business conditions for nine years, according to Dubai bank Emirates NBD.

The lender’s purchasing managers’ index, produced by IHS Markit, showed a contraction in new orders, easing job creation and softer output growth.

This resulted in the kingdom’s PMI score dropping from 52.8 to a record low 51.4. A score above 50 indicates growth and below 50 a contraction.

“The further softening of the non-oil activity data in April is surprising given the sharply higher oil prices so far this year, as well as the expansionary budget that was announced for 2018,” said Emirates NBD head of research Khatija Haque.

“Firms have cited subdued domestic demand as a reason for the decline in new orders last month, although export orders declined as well.”

Demand for goods and services deteriorated during April, resulting in the first contraction since the survey began in August 2009.

Companies blamed the fall on competitive pressures and subdued market demand, according to Emirates NBD.

Foreign sales decreased for the third month running and quantities of purchases grew at the slowest rate on record as firms reined in spending due to falling demand.

This also resulted in the first deterioration in input stocks in the survey’s history as companies utilised existing stockpiles of goods.

In terms of employment, respondents said they hired staff to comply with government Saudisation policy but the rate of creation was below the historical average.

Read: Saudi work ban could see tens of thousands of expats lose their jobs

However, despite the gloomy conditions respondents indicated that they expected the current slowdown to be temporary and for conditions to improve towards the end of the year.

The difficult opening months of the year for the non-oil private sector have coincided with the introduction of reforms including higher fuel and electricity prices, a 5 per cent value added tax and a new monthly levy for each foreign worker they employ.

The fee stands at SAR300 or SAR400 ($80 or 107) for each foreign worker, with companies that employ an equal or greater number of Saudis than expats paying the lesser amount.

The country’s finance minister has said there are no plans to revise the fee at present, despite some concerns from the kingdom’s chambers of commerce, and they are set to increase in 2019.

Read: Saudi finance minister says no plans to revise expat fee, other reforms

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