Saudi Arabia: GDP expands at the fastest pace in nearly a decade in Q3
A flash estimate showed that the economy grew 6.8% on an annual basis in the third quarter, after rebounding and expanding 1.8% in the second quarter. The result marked the fastest expansion in output since Q1 2012.
The rebound was mainly due to a robust expansion in oil sector activity, which rose 9.0% in Q3 (Q2: -7.0% yoy). However, non-oil private sector growth eased to 6.2% in Q3, after accelerating to 11.1% in the prior quarter. Meanwhile, government spending growth increased to 2.7% in Q3 from 0.4% in the second quarter.
Looking ahead, the non-oil private sector should continue to benefit from looser Covid-19 containment measures and the resumption of international travel as the global vaccination campaign gains further steam. Turning to the oil sector, the ongoing easing of OPEC+ production curtailments should continue to support the energy economy and oil output. That being said, the recent rise in new Covid-19 cases and the spread of the Omicron variant pose a downside risk to the outlook for both the oil and non-oil sectors.
Commenting on the GDP outlook, analysts at HSBC noted:
“Continued OPEC production restraint will cap overall growth at around 2.0% this year, but as oil output restrictions ease we see the economy expanding by an average of close to 4.0% over 2022–23. The rebound in the non-oil sector is already more advanced, with output in Q2 2021 some 10 [percentage points] above its pre-Covid-19 levels, boosted by easing domestic and cross border restrictions. High frequency data suggest momentum eased into the second half of the year but we expect consumption to remain firm, and look for investment to pick up pace as Public Investment Fund capital spending commitments are brought to fruition. We expect this pace of growth to be sufficient to nudge unemployment lower, but at over 10% among nationals the rate will remain high, with strong population growth and the rising labor force participation rate ensuring job creation remains a key policy concern.”