Saudi Arabia: GDP records best result since Q2 2023 in the first quarter
According to a preliminary reading, GDP fell at a more moderate pace of 1.8% year on year in the first quarter, above the 4.3% contraction seen in the fourth quarter of last year. Q1’s reading marked the best result since Q2 2023. On a seasonally-adjusted quarter-on-quarter basis, economic activity rebounded, expanding 1.3% in Q1, contrasting the previous period’s 0.6% decrease and marking the best result since Q4 2022.
The oil sector drove the improvement, with its output falling at a softer year-on-year pace of 10.6% (Q4: -16.2% yoy) and rebounding 2.4% in quarter-on-quarter terms (Q4: -4.0% s.a. qoq). Less positively, year-on-year growth of the non-oil and government sectors slowed to 2.8% (Q4: +4.2% yoy) and 2.0% (Q4: +3.1% yoy), respectively.
Our panelists expect the economy to continue gathering pace in the coming quarters, aided by a recovery in the petroleum sector as OPEC+ curbs to crude output are rolled back. That said, it remains unclear exactly when the OPEC+ curbs will be rolled back, posing a risk to the outlook; the market expects OPEC+ to extend the curbs to end-Q3 from end-Q2 at its next meeting on 1 June, and possibly until the end of the year.
Analysts at Fitch Solutions commented:
“In the coming decade, economic diversification efforts will remain the priority, and this will likely weigh on headline growth, which we think will remain vulnerable to swings in oil prices. Strong government commitment to push forward with Vision 2030 goals will allow for robust investment activity. Household consumption will also grow steadily thanks to positive demographic dynamics, although limited local industrial production means that consumers will keep purchasing mostly foreign goods. Overall, we forecast that real GDP growth will average 3.7% over the next decade, higher than the 2015-2019 average of 2.1%, but lower than the 2010-2019 average of 3.9%.”