Saudi Arabia Economic Outlook
As expected, growth weakened in Q1. In year-on-year terms, it slowed, and in seasonally adjusted quarter-on-quarter terms, it contracted. The slowdown was driven by the oil sector, with crude output falling after OPEC+ announced cuts to production quotas late last year. The non-oil sector was more resilient, easing slightly in year-on-year terms and rising slightly in seasonally adjusted quarter-on-quarter terms. The non-oil sector likely continued to benefit from low inflation and government investment in infrastructure and other diversification projects. In other news, in April, Fitch upgraded the government’s credit rating to ‘A+’ from ‘A’ with a stable outlook, citing Saudi Arabia’s commitment to reform and its large current account surplus and stock of international reserves.
Saudi Arabia Inflation
Inflation fell to 2.7% in March from 3.0% in February. The government’s fuel price cap continues to keep a lid on price pressures. Inflation is seen remaining subdued in 2023. Key factors to watch ahead include food prices and changes to government subsidies.