Saudi Arabia Economic Forecast

GDP growth slowed year on year and contracted quarter on quarter in Q1. The slowdown was driven by the oil sector. Crude output fell, largely due to lower OPEC+ quotas. The non-oil sector was more robust, with growth easing slightly year on year and rising slightly quarter on quarter. The non-oil sector likely benefitted from low inflation and government spending on diversification projects. Turning to Q2, the non-oil sector PMI rose in April to the second-highest print in nearly eight years, boosted by tourist arrivals and infrastructure projects. Less positively, crude output fell 0.43 million barrels per day (mbpd) month on month—around 4%—in May as the quota cut agreed to the month prior came into force. Crude output will fall further in July and onward after the government announced in early June that it would unilaterally cut output by 1 mbpd.

Inflation was stable at 2.7% in April. The government’s fuel price cap continues to constrain price pressures, with inflation seen remaining weak in 2023. Key factors to watch ahead include food prices and changes to government subsidies.