Spending spree boosts Saudi Arabia economy

04/03/2015 07:29 AST

Growth in Saudi Arabia's non-oil private sector accelerated to a four-month high in February as lavish handouts to citizens by the new king buoyed the economy despite the plunge in oil prices, a survey of businesses showed yesterday.

The seasonally adjusted SABB HSBC Saudi Arabia Purchasing Managers' Index rose to 58.5 points last month from 57.8 in January. It stayed well above the 50-point level separating expansion from contraction.

The government has pledged to use its huge fiscal reserves to offset the impact of cheap oil with heavy state spending, while late in January King Salman marked his accession by announcing additional social and infrastructure spending.

That package, including immediate payment of two months' bonus salary to state employees, was estimated by analysts to comprise extra government spending of about 90 billion riyals ($24bn) this year. It appeared to boost consumer spending in February.

Output growth jumped to 64 points in February from 60.3 in January, although new order growth fell marginally to 65.6. Employment growth accelerated to 54 points from 52.8.

Input price inflation slowed to 52.5 points while output price inflation edged up to 50.2.

Business activity growth in the UAE' non-oil private sector slowed to a five-month low in February but remained strong and above the average for 2014, the survey showed.

The Purchasing Managers' Index fell to 58.1 points last month from 59.3 in January.

Output growth slowed to 64.3 points from 65.5 points, while new order growth dropped to an 18-month low of 63.3 from 67.9.

Gulf Daily News