Saudi Arabia: GDP expands for the first time in two years in Q2
A flash estimate showed the economy grew 1.5% on an annual basis in the second quarter, after contracting 3.0% in the first quarter. The result marked the first expansion in output since Q2 2019.
The rebound was mainly due to a noticeably softer fall in oil sector activity, which contracted 7.0% in Q2 (Q1: -11.7% yoy). Moreover, non-oil sector growth gained momentum in the second quarter, increasing to 10.1% after reaching 3.7% in the prior quarter. Furthermore, government spending growth also ticked up to 0.7% in Q2 from Q1’s 0.3%.
Going forward, the non-oil private sector should continue to benefit from the gradual easing of Covid-19 containment measures and the resumption of international travel as the global vaccination campaign gains further steam. Turning to the oil sector, the easing of OPEC+ production curtailments from May through to October, coupled with higher prices and a low base effect, should benefit oil output for the remainder of the year—boding well for overall GDP.
Commenting on the outlook for the non-oil sector, analysts at Jadwa Investment noted:
“Looking ahead, we expect consumer spending to remain strong during H2 2021, especially as restrictions around social distancing are gradually relaxed (as herd immunity is reached) and a flurry of entertainment and leisure events are opened up to vaccinated individuals. For example, not only is Saudi Arabia hosting the Formula One Grand Prix race in December, the return of a large-scale leisure and entertainment festival (or ‘Saudi Seasons’) is also scheduled in Q4.”