Saudi non-oil economy holds up even as rate hikes start to bite

Saudi non-oil economy holds up even as rate hikes start to bite

“The effects from tighter monetary conditions have started to be mildly felt across the kingdom’s private sector,” said Naif Al-Ghaith, chief economist at Riyad Bank. “To some extent, the slowdown in business activity was expected and owed to business cycle dynamics and ongoing market repricing adjustments.”

Intense competition led to price discounting during the month. Still, business activity growth held close to levels seen in June.

The Saudi riyal is pegged to the US dollar and the kingdom’s central bank has to follow the Fed’s decisions closely, even though Saudi inflation has been well below that of the US in the past two years. The US Federal Reserve has hiked interest rates to lower inflation, with its latest move of 25 basis points last month.