Saudi Arabia’s non – oil economy slips into contraction as war disrupts trade

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PMI data show first contraction since 2020 as weaker orders, falling exports and logistics disruption expose the cost of regional instability.

PARIS, April 5 (SaudiArabia Breaking News) - Saudi Arabia’s non-oil private sector contracted in March for the first time since August 2020, as conflict in the Middle East weighed on demand, disrupted exports and intensified supply-chain pressures, according to a closely watched business survey released on Sunday.

The seasonally adjusted Riyadh Bank Saudi Arabia Purchasing Managers’ Index, complied by S&P Global, fell to 48.8 in March from 56.1 in February dropping below the 50 threshold that separates expansion from contraction.

The reading marks a sharp reversal for the kingdom’s non-oil economy and suggests that regional tensions are beginning to weigh more heavily on business activity, despite the broader momentum behind Saudi Arabia’s diversification drive.

Naif Al-Ghaith, chief economist at Riyadh Bank, said the decline largely reflected short – term uncertainty linked to geopolitical tensions in the region.

“The softer reading was mainly driven by a pause in new orders as clients adopted a more cautious stance. Export orders saw a notable pullback, with some firms reporting a temporary slowdown in cross – border activity. This led to a moderation in output”, he said.

Output and new orders both declined for the first time since August 2020, when the coronavirus pandemic brought economies around the world to a standstill. The new orders sub-index fell sharply to 45.2 in March from 61.8 in February, pointing to an abrupt loss of momentum in demand.

Export conditions were especially weak. New export orders recorded their steepest fall in almost six years, with some companies reporting that exports had been halted altogether, while others cited mounting logistical difficulties.

Supply strains intensified even as demand softened, leaving business to contend with weaker order books alongside more difficult operating conditions. That pressure may persist while the conflict continues to disrupt regional trade routes, including through the Strait of Hormuz.

Even so, the survey din not point to a collapse in confidence. Business expectations for the next 12 months remained in positive territory overall, although they weakened to their lowest level since June 2020.

Some firms continued to cite government spending, infrastructure development and stronger long – term demand as grounds for optimism. That suggests many businesses still view the March setback less as a sign of structural weakness than as a temporary shock driven by regional instability.

Still, the latest figures serves as a reminder that Saudi Arabia’s non – oil economy, while more resilient in recent years, remains exposed to external shock when geopolitical tensions begin to disrupted trade, confidence and cross – border commercial activity.