Key Takeaways:
- Saudi Arabia’s GDP growth slowed in Q2 of 2023.
- The cut in oil production and a price slump characterize the slow growth.
- Last week, the IMF revised its 2023 GDP growth projection for Saudi Arabia to 1.9%.
YEREVAN (CoinChapter.com) — Saudi Arabia’s economic performance in the second quarter (Q2) of this year showed signs of slowing down amid challenges from the oil market. According to recent data by the Saudi General Authority for Statistics, the oil giant’s gross domestic product (GDP) recorded a growth rate of 1.1%.
Recent government estimates revealed that non-oil activities were crucial in supporting the economy. However, the overall growth rate was considerably lower than the previous year.
GDP slows down after a strong 2022
Last year, Saudi Arabia experienced a robust economic growth of 8.7%, ranking among the fastest-growing economies within the G20. This impressive expansion came on the backdrop of the surge in crude oil prices.
The growth in demand, as well as high oil prices, bolstered revenue. This resulted in the Kingdom’s first budget surplus in nearly a decade.
However, the economic landscape has evolved. Growth forecasts for 2023 were revised downwards due to lower oil prices and the potential prolongation of crude oil production cuts.
In the second quarter of this year, oil activities witnessed a decline of 4.2% compared to the same period last year. This decline exerted downward pressure on overall economic growth.
On the other hand, non-oil activities experienced a notable upswing. These expanded by 5.5%, as reported by the General Authority for Statistics.
The disparity becomes evident when comparing the second quarter of 2023 to the same period in the previous year. In Q2 2022, real GDP growth was at an impressive 11.2%, largely driven by a significant increase in oil activities, which surged by nearly 23%.
However, this substantial growth last year contributed to the challenge of maintaining such a high growth rate in the following year, considering the fluctuations in the oil market.
IMF Cuts Saudi Arabia’s GDP Growth Projection
Last week, the International Monetary Fund (IMF) revised its 2023 GDP growth projection for Saudi Arabia to 1.9%.
The IMF’s growth forecast for the world’s top oil exporter in May stood at 3.1%. Last month, it said growth could ease to 2.1% in 2023. However, the UN organ had to revise the county’s projection further.
“The downgrade for Saudi Arabia for 2023 reflects production cuts announced in April and June in line with an agreement through OPEC+…whereas private investment, including from “giga-project” implementation, continues to support strong non-oil GDP growth,”
the IMF said in its report earlier this month.
The revision reflects the potential impact of prolonged oil production cuts on the world’s top oil exporter. This adjustment highlights the importance of diversifying the economy further and finding sustainable avenues for growth beyond the oil sector.
Meanwhile, experts expect Saudi Arabia to extend its voluntary oil output cut of 1 million barrels per day for an additional month, covering September. This move aims to provide continued support to the oil market and comes as oil prices show signs of posting the biggest monthly gain in over a year.
The Kingdom’s second-quarter GDP growth of 1.1% reflects the complexities of managing an economy heavily reliant on oil revenues. This diversification towards non-oil sectors is a positive sign for the Saudi economy.
It showcases its efforts to reduce dependence on oil revenues and create a more resilient economic base.
