Saudi Arabia: GDP contracts in Q1 at the sharpest pace in over two years
June 30, 2020
The economy contracted for the third consecutive quarter in Q1 and at the sharpest pace since December 2017 as a significant slowdown in the non-oil sector and ongoing oil production cuts weighed on activity. GDP fell 1.0% on an annual basis in the first quarter, after contracting 0.3% in Q4 last year.
A sharp decline in oil sector output, which fell 4.6% year-on-year in Q1 (Q4 2019: -5.8% year-on-year), drove the contraction. Moreover, growth of the non-oil sector slowed to a near three-year low of 1.6% in Q1, which was down from the 3.8% expansion in the quarter prior and likely due to the Covid-19 induced shock to demand.
Looking ahead, unprecedented OPEC+ production cuts, which were reintroduced in May and extended in June, should take a massive toll on the energy sector. Furthermore, anemic global economic activity and domestic containment measures around Covid-19 will weigh heavily on the non-oil sector—particularly the retail and tourism sectors.
Author: Steven Burke, Economist