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Saudi Arabia’s SMEs Record Highest Employment Growth in 10 Months

Saudi Arabia’s small and medium-sized enterprises (SMEs) have achieved a record growth in job creation over the past 10 months, according to a recent report.

The Riyad Bank Saudi Arabia SME Purchasing Managers’ Index (PMI) indicated that Saudi SMEs recorded strong growth at the end of the year, with a significant rise in workloads that accelerated employment for ten months.

Improved Performance

The Riyad Bank SME PMI registered 56.9 in December, slightly lower than the 57.1 in November. However, it remains well above the neutral 50.0 threshold, indicating a strong upturn in overall business performance.

During the fourth quarter of 2024, the SME sector experienced an improvement compared to the third quarter with PMI registering 56.8, an increase from 54.5 in Q3 and the highest reading for any quarter since Q4 2023.

Saudi Arabia’s SMEs Record Highest Employment Growth in 10 Months

The Riyad Bank SME PMI is a quarterly report published by Standard and Poor’s (S&P) Global. It monitors business conditions at the SME sector.

Increase in Output Levels

An improvement in business conditions led to a sharp increase in output levels and incoming new orders. The increased business and consumer spending, as well as the supportive economic backdrop, have driven stronger demand.

On this occasion, the Chief Economist at Riyad Bank, Naif Al-Ghaith, said: “This upturn in the SME sector is a testament to the thriving economic environment, characterized by increasing output levels and a surge in incoming new work. The heightened demand conditions are attributed to an uptick in both business and consumer spending, buoyed by a supportive economic backdrop.”

Furthermore, the rate of inflation eased slightly in December, despite the higher input costs, including higher salary payments and rising raw material prices.

Job Creation

In December, SMEs saw a significant increase in staffing levels and recorded the fastest growth rates since February. The SMEs participating in the survey attributed the greater demand for staff to long-term expansion plans and upcoming new projects.

Saudi Arabia’s SMEs Record Highest Employment Growth in 10 Months

In the light of this, Al-Ghaith said: “One of the standout aspects of the December PMI was the significant rise in job creation. The survey revealed a solid increase in staffing numbers, with the growth rate hitting its highest point since February. This surge in employment is fueled by long-term business expansion plans and upcoming new projects, reflecting a positive outlook among SMEs.”

Rising Optimism

Business activity expectations among SMEs continued to improve for the third consecutive months in December, with confidence reaching its highest level since March. The survey respondents cited expected enhancements in broader domestic economic conditions as a reason for their optimism.

“This optimistic trajectory aligns with Saudi Arabia’s Vision 2030. The strong performance of SMEs, as evidenced by the Riyad Bank Saudi Arabia SME PMI, underscores the ongoing efforts to bolster economic diversification and support the growth of this sector,” Al-Ghaith noted.

The Riyad Bank Chief Economist highlighted the significance of SMEs in driving economic diversification plans. “SMEs are crucial to any economy, particularly in the context of economic diversification. They drive innovation, create jobs, and contribute significantly to GDP. In Saudi Arabia, the focus on enhancing the SME sector is integral to Vision 2030, which aims to diversify the economy beyond oil dependency,” he said.

Al-Ghaith added that the strong performance of SMEs marks a positive signal towards achieving Vision 2030 objectives. “By fostering a vibrant SME sector, Saudi Arabia can enhance its economic resilience, create sustainable employment opportunities, and promote inclusive growth, all key components of a diversified and dynamic economy,” he said.

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