The big picture: Saudi Arabia’s non-oil private sector grew at its fastest pace in six months in August. Stronger output and steady domestic demand drove the gain. The Riyad Bank Purchasing Managers’ Index, which S&P Global compiles, climbed to 53.8 from 53.1 in July. That extends a five-month run of expansion and puts the index comfortably above the 50.0 line separating growth from contraction.
Why it matters: The reading lands weeks after GASTAT flash data showed real GDP contracting 4.8% year-on-year in the second quarter. A 24.7% plunge in oil output drove that decline. Non-oil activities still grew 0.6% that same quarter, though, and August’s PMI shows that resilience strengthening. For a kingdom racing toward Vision 2030’s 65% non-oil GDP target, that divergence is the whole point.
Output Leads the Rebound
Output expanded at its strongest pace in seven months. New orders rose for a fifth consecutive month, too. Riyad Bank’s chief economist, Dr. Naif Al-Ghaith, said the survey “reinforces the view that the non-oil economy is maintaining positive momentum through the third quarter.” The improvement, he added, “reflects a continued recovery in market activity,” with output “approaching its long-term average.”
Domestic demand remains the engine. “Domestic demand remains an important growth driver, and continues to provide a solid foundation for companies,” Al-Ghaith said. Firms, he noted, “appear to have sufficient capacity to respond to rising demand without significant operational bottlenecks.” Export orders told a different story, however. They fell sharply, and faster than in July, as regional tensions and stiff foreign competition squeezed overseas sales. Firms also flagged intense domestic competition and oversupply as constraints, even as local sales volumes climbed.
Hiring rose for a second straight month, though job creation stayed below its long-run trend. Backlogs of work fell for a third straight month, too, signalling spare capacity. Supply chains kept improving, aided by faster local sourcing. Firms consequently accelerated input buying to its fastest rate since February. Cost pressures stayed elevated, though: material, shipping and staff costs all rose. Yet firms raised selling prices at their slowest pace since March, since fierce competition limited how much they could pass on to customers.
Vision 2030 Momentum Builds
Business confidence jumped to a seven-month high in August. Twenty percent of firms expect activity to rise over the next year, versus just 2% forecasting a decline. Al-Ghaith struck an optimistic tone: “Overall, the August survey points to a more consistent growth path for the non-oil private sector.” Improving confidence and steady domestic activity, he said, provide “a constructive foundation for growth for the remainder of 2026.” Sustained government spending and development projects remain key pillars, he added, while rising confidence is translating into investment and hiring.
The bigger picture backs him up. Saudi Arabia’s non-oil GDP share has climbed from roughly 44% at Vision 2030’s 2016 baseline to around 55% today. That narrows the gap to the 65% goal by more than half. Tourism is a standout pillar: the kingdom logged over 122 million visits in 2025. That generated roughly $80 billion, or SAR 300 billion, in spending. The OECD projects the economy will expand 3.2% in 2026 and 4.3% in 2027. Meanwhile, analysts expect the fiscal deficit to narrow to 3.7% of GDP, down from 5.8%.
By the numbers:
- 8: August PMI reading, up from 53.1 in July and the highest in six months.
- 5: consecutive months of non-oil private-sector expansion.
- -4.8%: year-on-year change in Q2 2026 real GDP, versus +0.6% growth in non-oil activities.
- -24.7%: year-on-year drop in oil-sector activity in Q2 2026.
- 65%: Vision 2030’s target non-oil GDP share by 2030, up from about 55% now and 44% in 2016.
- 122M+: domestic and international tourist visits in 2025.
- $80B / SAR 300B: approximate 2025 tourism spending.
- 2% → 4.3%: OECD-projected GDP growth for 2026 and 2027.
- 20% vs 2%: share of firms expecting activity to rise versus fall over the next year.
Challenges and Opportunities
The bottom line: August’s PMI shows Saudi Arabia’s diversification drive absorbing an oil-sector shock without losing steam. The non-oil economy looks set to keep closing the gap toward its 2030 targets.
What’s next: Saudi Arabia actively accelerates economic structural reforms to shield national finances from global oil price volatility. Under Vision 2030, Saudi Arabia channels massive investments into giga-projects, logistics, tourism, technology, and manufacturing. Private sector firms increasingly spearhead domestic commercial expansion as government spending creates vast ecosystem opportunities. Consequently, August’s PMI survey demonstrates that non-oil commercial expansion continues to serve as the chief engine driving sustainable economic transformation throughout Saudi Arabia.
