Saudi Production Growth 2024: Driven by a 4.6% rise in manufacturing, Saudi Arabia’s Industrial Production Index reached 106.2 points in July, offsetting a slight dip in mining and oil production

Saudi Arabia’s Industrial Production Index (IPI) rose by 1.6% in July 2024 compared to the same period last year, as per data from the General Authority for Statistics (GASTAT). The rise was largely fueled by a 4.6% increase in manufacturing activities, a crucial part of the Kingdom’s economic diversification strategy under Vision 2030. This growth pushed the IPI to 106.2 points for the month, despite a slight dip in mining and oil production. This performance highlights the significance of Saudi Production Growth 2024 in balancing sectoral contributions.

The surge in manufacturing was primarily driven by chemical products and food items, which saw production increases of 5.7% and 10.1%, respectively. This growth highlights the Kingdom’s ongoing efforts to reduce its reliance on oil and expand its industrial sector.

Despite the rise in manufacturing, mining and quarrying activities experienced a slight decline, falling by 0.8% year-on-year. This was primarily due to Saudi Arabia’s decision to cut oil production to 8.9 million barrels per day, in line with OPEC+ agreements. Consequently, oil-related activities dropped by 1.1% in July compared to the previous year.

However, non-oil activities, which are central to Saudi Arabia’s diversification goals, saw a significant increase of 8.2%. This was buoyed by the expansion of various non-oil economic sectors, highlighting the country’s shift towards a more sustainable and diversified economic model.

Saudi Arabia had previously cut oil production by 500,000 barrels per day in April 2023, a measure that has been extended until December 2024 to stabilize global oil markets. In addition to oil, the Kingdom also saw a substantial 8.2% year-on-year increase in electricity, gas, steam, and air conditioning supply activities. Despite these gains, there was a slight dip in mining and oil production, reflecting the complexities of Saudi Production Growth 2024.

On a month-to-month basis, manufacturing activities also showed positive momentum, rising by 1.7% in July, with coke and refined petroleum products recording a notable 3.3% increase. Mining and quarrying activities also grew slightly, rising by 1.3% compared to June.

The month-on-month trend also revealed gains in both oil and non-oil activities, which rose by 1.6% and 1.8%, respectively. These trends reflect the Kingdom’s gradual but steady progress toward its Vision 2030 objectives, which aim to transition the economy away from a dependency on oil revenues and toward more diverse industrial outputs.

The IPI, an important economic indicator, measures changes in industrial output based on production surveys. These latest figures underscore the importance of the manufacturing sector as a critical driver of the Kingdom’s economic transformation.

Analysis

Political: The rise in Saudi Arabia’s Industrial Production Index (IPI) in July directly aligns with the goals set out in Vision 2030, which aims to diversify the economy and reduce dependency on oil revenues. The increase in manufacturing, particularly in chemical products and food items, reinforces Saudi Arabia’s commitment to creating a more sustainable economy. Politically, the expansion of the non-oil sector could strengthen Saudi Arabia’s position in the global market and reduce its vulnerability to fluctuations in oil prices. Additionally, the cut in oil production, aligned with OPEC+ agreements, shows the Kingdom’s commitment to maintaining stability in the global oil markets, which is vital for both its political standing and economic resilience.

Social: From a social perspective, the growth in manufacturing suggests the potential for job creation in various sectors, particularly those related to chemical production and food manufacturing. As Saudi Arabia works to diversify its economy, there is a strong focus on developing industries that can offer sustainable employment opportunities for its youth, a key demographic in the country. Vision 2030 also emphasizes empowering citizens with skills suited for a post-oil economy, and the manufacturing sector plays a pivotal role in fulfilling that promise. The rise in non-oil industrial activities, despite a slight dip in mining and oil production, demonstrates the Kingdom’s focus on creating more diversified career pathways, contributing to social stability and long-term economic growth.

Racial: While industrial growth was the focus of the report, the diversification of Saudi Arabia’s economy through increased manufacturing capacity also offers the potential for more inclusive growth. As the Kingdom looks to attract foreign investment and talent to support these burgeoning sectors, racial and ethnic diversity could play a more significant role in shaping its workforce. The success of industrial expansion will depend not only on infrastructure but also on the inclusion of a broader demographic in the workforce, potentially leading to a more diverse and cosmopolitan industrial landscape.

Gender: The rise in industrial production, particularly in manufacturing, could open new opportunities for women in Saudi Arabia’s workforce. As part of Vision 2030, the Saudi government has been committed to increasing women’s participation in the labor market. Manufacturing offers potential roles in various capacities, including management, engineering, and production oversight. The Kingdom’s move towards a more diversified economy aligns with its efforts to close the gender gap in employment, and industrial growth provides a fertile ground for furthering gender inclusion in the workforce.

Economic: Economically, the 1.6% rise in IPI represents a positive trend for Saudi Arabia, signaling that the country is on track to meet some of its key Vision 2030 targets. The sharp growth in manufacturing, particularly in chemicals and food production, highlights the sector’s role in driving the economy forward. This growth also mitigates some of the effects of reduced oil production, ensuring that the economy is not overly reliant on volatile oil markets. Furthermore, the rise in non-oil activities by 8.2% underscores the Kingdom’s ability to stimulate economic growth through diversification. The expansion of the non-oil sector could attract foreign investments, boost GDP, and create new industries that will further accelerate Saudi Arabia’s transition to a more balanced economic structure.

The slight dip in mining and oil-related activities highlights the country’s strategic decision to cut oil production to maintain market stability. However, the month-on-month increase in oil activities suggests that these cuts are being managed in a way that stabilizes both domestic and global markets. The rise in electricity and gas activities also points to broader infrastructure development, crucial for sustaining future industrial growth.

Saudi Arabia’s industrial growth, especially in manufacturing, is central to achieving long-term economic sustainability and resilience. By fostering sectors beyond oil, the Kingdom is positioning itself to compete in the global economy while also ensuring domestic stability through job creation and industrial diversification.