Saudi Arabia sees strongest growth in jobs in five years amid business boom

Saudi Arabia saw the strongest increase in employment in almost five years even as business conditions in its non-oil economy improved at a slightly slower pace at the end of last year following a surge.

Companies sought to add to their staffing capacity in response to an increase in sales and higher demand, according to a survey of purchasing managers compiled by S&P Global and published on Tuesday.

The Riyad Bank Saudi PMI stood at 56.9 in December, well above the 50-mark separating growth from contraction. The gauge reached 58.5 in November, the highest reading in more than seven years.

“We see operating conditions remaining favorable in December, characterized by rapid growth in the non-oil activities and a robust labor market by the end of 2022, with both jobs and wages having far more momentum than previously thought,” said Naif AlGhaith, chief economist at Riyad Bank.

The buoyancy of the non-oil private sector the engine of job creation for the world’s top crude exporter reflects the strength of the economic momentum after the pandemic that’s been largely immune to a sharp uptick in the cost of money at home and the threat of a slowdown globally.

Prices charged by companies increased at the fastest rate in nine months in December, as firms saw a need to pass increased expenses onto clients.

“The increase in interest rates has been offset by the rapid growth,” AlGhaith said. “This significant growth pushed prices even further in the service sector, pointing to an inflationary pressure caused by the demand side.”

Banks in Saudi Arabia are expected to continue to prioritize their liquidity demands for the coming year despite enhanced earnings, through focusing on raising Tier I capital in the form of debt issuances, notably Sukuk, according to KPMG, a leading provider of audit, tax and advisory services in Saudi Arabia.

In the first nine months of 2022, issuances of $3.8 billion have been conducted and this is expected to grow in coming months as banks are fuelling the increased demand in the public and private sector. “An upsurge in Tier I capital issuance has been noted across the banking participants as banks are further strengthening their equity base,” commented Khalil Ibrahim Al Sedais, Office Managing Partner – Riyadh, at KPMG in Saudi Arabia.

The regulatory agenda is also ensuring a robust capital base through the implementation of Basel 4 as final rules have emerged. While the implementation was delayed due to the pandemic, global regulators are now pushing ahead for a ‘full and consistent’ framework implementation.

“Banks could face significant challenges as they refresh their Basel 4 programs,” said Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia, noting that banks in the Kingdom will need to ensure that they are well -prepared to achieve compliance within the required timelines of Saudi Central Bank in a cost-effective manner.

In its Q3 2022 ‘Banking Pulse’ report, KPMG highlighted the latest developments in the Kingdom’s banking sector. An analysis of the nine-month financial performance of the banking sector reflected a robust industry performance, particularly highlighted by an increase in net profit by 26.21pc yearon-year, to$12.33b (46.41b Saudi riyals) in the first nine months of 2022, with total assets rising 9.76pc year-on-year to 3,329b riyals.