The Saudi economy grows by 1.1 per cent in the second quarter of 2023

Non-oil activities grew by 5.5 per cent in the Saudi economy in the second quarter of 2023. (Photo by Adobe) 
Non-oil activities contributed to an increase in gross domestic product (GDP) of 5.5 per cent in the Saudi economy in the second quarter of 2023, writes Ahmad Abdul-Rahman.

The Saudi government estimates that Saudi GDP grew by 1.1 per cent in the second quarter of 2023, compared to the same period of the previous year.

In a statement, the Saudi General Authority for Statistics (GASTAT) said that growth was largely driven by an increase in non-oil activities, which grew by 5.5 per cent in the second quarter, in addition to the rise achieved by government services activities, which grew by 2.7 per cent. Oil activities in this period contracted for the first time on a quarterly basis since the second quarter of 2011, which saw negative growth of 4.2 per cent in the three months ending in June  2023 compared to the same period last year. The first quarter of the year saw growth of 1.4 per cent.

The seasonally adjusted real GDP decreased by 0.1 per cent in the second quarter of 2023 compared to the first quarter, affected by the decline in oil activities.

Non-oil activities

Saudi Arabia's GDP grew in the first quarter of this year by 3.8 per cent, supported by the growth of non-oil activities, which grew at a rate of 5.4 per cent, according to data from the Statistics Authority.

Last March, Moody's, the credit rating agency, raised its expectations for real GDP growth in Saudi Arabia for the years 2023 and 2024. Moody's said: "The revision to increase the growth rate to 2.5 per cent in 2023 and then to 3.1 per cent in 2024 reflects expectations that non-oil private sector activity will remain strong."

Riyadh had estimated the 2023 budget would achieve a surplus of 16 billion riyals (USD 4.3 billion), or an average of four billion riyals (USD 1.06 billion).

During the first quarter of 2023, the Saudi budget recorded a deficit of 2.91 billion riyals (USD 776 million), after achieving revenues of 280.94 billion riyals (USD 74.9 billion) for the same period a year earlier This compares to out-goings of 283.86 billion riyals (USD 75.7 billion)

Saudi Arabia is the largest Arab economy and the largest oil exporter in the world. It recorded a budget deficit of 45.7 billion riyals (USD 12.2 billion) in the last quarter of last year, against a surplus of 57.5 billion riyals (USD 15.4 billion) in the same period last year.

Diversifying the Saudi economy

Saudi Arabia wants to diversify its economic base and sources of income away from oil. It also aims to increase the participation rate of the private sector to 65 per cent instead of 40 per cent. Diversifying the Saudi economy away from oil is "the biggest challenge facing the country," according to the Saudi Minister of Economy and Planning, Faisal Al-Ibrahim. He was speaking during the Milken Institute's global conference in Beverly Hills, California, earlier this year.

Last April, Saudi Arabia announced a reduction in oil production by 500,000 barrels per day, as of early May. This is part of other cuts by OPEC + producers, amounting to 1.16 million barrels per day.

Last March, Moody's raised its expectations regarding the growth of Saudi Arabia's GDP from previous estimates that it had announced in November 2022. It predicts growth of 1.7 per cent in 2023, then 2.6 per cent in 2024. The credit rating agency had expected the Saudi economy to grow at an average rate of about 3.9 per cent from 2022 to 2026.

In 2022, Saudi Arabia achieved growth of 8.7 per cent, the largest in 11 years, and is the highest among the G-20 countries.

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Saturday, 02 December 2023