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RIYADH: Saudi Arabia\u2019s small and medium-sized enterprises recorded their fastest growth in new orders in seven months in September, helping business conditions improve for a second consecutive quarter, an economic tracker showed.\u00a0<\/p>\n
The overall Riyad Bank Saudi Arabia SME Purchasing Managers\u2019 Index, compiled by S&P Global, edged down slightly to 53.8 in September from 53.9 in August but remained above the 50 mark that separates expansion from contraction.\u00a0<\/p>\n
The improvement came amid regional conflict that has disrupted shipping and weighed on business sentiment. Saudi Arabia aims to increase the contribution of SMEs to gross domestic product to 35 percent under Vision 2030, up from around 20 percent.\u00a0<\/p>\n
Naif Al-Ghaith, chief economist at Riyad Bank, said: \u201cThe September SME PMI results provide an encouraging signal on the underlying strength and resilience of Saudi Arabia\u2019s SME sector. \u00a0<\/p>\n
He added: \u201cThe quarterly average improved to 52.7 in the third quarter from 51.4 in the second quarter.\u201d \u00a0<\/p>\n
New order growth accelerates\u00a0<\/strong><\/p>\n According to the survey, improving business conditions reflected a robust and accelerated rise in new work received by SMEs.\u00a0<\/p>\n New business grew at its fastest pace in seven months, supported by a sustained rebound in sales enquiries and resilient domestic economic conditions.\u00a0<\/p>\n Although firms generally reported improving demand, some cited geopolitical tensions and elevated cost pressures as headwinds to growth.\u00a0<\/p>\n Commenting on the report, Ryan Alnesayan, a partner at Arthur D. Little responsible for the Middle East and Saudi Arabia, said: \u201cThis momentum creates an opportunity for Saudi SMEs to take a bigger role in the Kingdom\u2019s supply chains. Major projects can open doors, but businesses need to be ready to deliver.\u201d\u00a0<\/p>\n He added: \u201cInvesting in capacity, skills and productivity will help them fulfil contracts reliably and compete for larger ones. The real measure is how much of today\u2019s demand becomes lasting growth.\u201d\u00a0<\/p>\n Job creation strongest in 6 months\u00a0<\/strong><\/p>\n Business activity growth remained robust in September, although it eased from the eight-month high recorded in August. <\/p>\n This encouraged another marginal increase in SME employment, with the pace of job creation reaching its highest level since March.\u00a0<\/p>\n Stronger demand and plans to expand business activity led to the sharpest increase in input buying in seven months. Suppliers\u2019 delivery times continued to shorten during September, reflecting successful efforts to diversify supply chains. However, higher raw-material and transportation costs drove another robust increase in input prices.\u00a0<\/p>\n Future outlook\u00a0<\/strong><\/p>\n The survey showed that SMEs remained optimistic about the year-ahead business outlook, driven by positive sales pipelines and hopes for greater regional stability.\u00a0<\/p>\n However, confidence eased from August\u2019s level and remained below June\u2019s recent peak.\u00a0<\/p>\n \u201cThe September results reinforce the important role of SMEs in supporting Saudi Arabia\u2019s economic diversification. The simultaneous improvement in new business, employment and purchasing activity provides a constructive indication of private-sector momentum,\u201d said Al-Ghaith.\u00a0<\/p>\n He concluded: \u201cAs the Kingdom continues to advance Vision 2030, a dynamic and expanding SME sector will remain an important contributor to job creation, private-sector development and the broadening of the Kingdom\u2019s non-oil economic base.\u201d\u00a0<\/p>\n<\/div>\n