Saudi Arabia’s non-oil private sector experienced a contraction in March, according to the latest purchasing managers’ index data, as regional tensions and conflict-related uncertainty weighed on business conditions.

The data indicates a decline in activity across key areas of the non-energy economy, marking a shift from previous growth trends.

Businesses reported softer demand, with new orders easing as both domestic and external conditions became more challenging.

Analysts point to the broader regional environment as a significant factor influencing the downturn.

Heightened uncertainty linked to ongoing conflicts has affected sentiment, with companies adopting a more cautious approach to expansion, hiring and investment.

Despite the contraction, some underlying indicators suggest resilience within the sector.

Firms have continued to adjust operations, manage costs and maintain output levels where possible, reflecting efforts to navigate a more complex economic landscape.

The non-oil economy is a central pillar of Saudi Arabia’s long-term diversification strategy, making the latest figures particularly significant.

Policymakers have been working to expand activity beyond the energy sector, encouraging investment and fostering new industries.

While the March data highlights short-term pressure, observers note that the trajectory of the non-oil sector will depend heavily on the broader regional outlook and the pace at which stability returns.

Continued reforms and investment initiatives are expected to play a role in supporting recovery.

The latest PMI reading underscores the sensitivity of economic activity to geopolitical developments, as businesses adjust to evolving conditions across the region.