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Saudi non-oil business growth slows to record low in October

[DUBAI] Growth in Saudi Arabia's non-oil private sector slowed in October, a survey of businesses showed on Tuesday, reaching its lowest level since the survey was launched in August 2009.

The data suggests low oil prices are starting to have a major impact throughout the economy of the world's top oil exporter by creating a huge state budget deficit, estimated by the International Monetary Fund at over US$100 billion this year.

The government has said that to reduce the gap, it has started spending cuts in some areas, although it has not given details. Meanwhile, its borrowing to finance the deficit is pushing up Saudi money market interest rates.

The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers' Index dropped to 55.7 last month from 56.5 in September. It remained well above the 50-point mark which separates growth from contraction, however.

"The October PMI data points to a slower rate of growth in the non-oil private sector as we head into the fourth quarter, which is unsurprising in the context of sharply lower oil revenues and tighter liquidity conditions," said Khatija Haque, head of regional research at Emirates NBD.

"However, the rate of expansion in the non-oil sector is still relatively robust, and overall GDP growth will also be underpinned by higher oil production this year."

Output growth slowed only moderately in October to 63.2 from 63.7, but growth in new orders slipped to a record low of 58.4 from 60.4. Employment growth also slowed.

Output price inflation fell to 50.1 while input price inflation increased, to a 14-month high of 54.6.