Saudi Arabia Economic Outlook
In the third quarter, the economy contracted the most since the height of the Covid-19 pandemic in Q3 2020. Oil production was 17.4% less in the quarter than in the same period a year ago as a result of cuts to crude output made with OPEC and those made unilaterally. In addition, non-oil firms increased their production at the slowest year-on-year pace since Q4 2020. Turning to the fourth quarter, the economy is highly likely to contract again. Crude production fell around 17% in October, and similarly large falls are likely in November and December. More positively, in October, non-oil business activity continued to rise at one of the speediest paces in the last decade. All eyes are now on the next OPEC+ meeting, which was delayed to 30 November from 26 November due to Saudi Arabia reportedly pushing for other members to join it in cutting oil production further.
Saudi Arabia Inflation
Inflation eased to 1.6% in October, down from September’s 1.7% and the lowest since February 2022. Next year, inflation is set to decline slightly on average compared to this year on a tougher base effect and past interest rate hikes. Changes to government subsidies and rises in food prices as a result of El Niño are key upside risks.