Saudi GDP shrinks for second quarter in a row amid Opec oil cuts
DUBAI: Saudi Arabia’s economy contracted for the second quarter in a row as the kingdom grapples with low oil prices and its businesses struggle to cope with economic reforms.
The kingdom’s gross domestic product shrank 1% from the same period a year earlier, when it expanded 0.9%, according to official data released on Saturday. The economy had contracted 0.5% in the first three months of 2017.
Crown Prince Mohammed Salman is leading the push to transform the biggest Arab economy at a time when crude prices are at about half their 2014 peak. But as authorities seek to reduce the kingdom’s reliance on oil, they’re also leading efforts among Opec members and some other major producers to bolster prices by cutting output. Saudi’s oil GDP shrank 1.8% in the second quarter, weighing on overall activity.
The data also showed how non-oil industries are still struggling with efforts to overhaul the economy and shore up public finances. The non-oil GDP, the main engine of job creation, expanded below 1%, driven mainly by the government sector, the data show.
“What we’re seeing is stagnation in non-oil activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “Second-quarter data show still very lacklustre demand” even after the government reversed a decision to cut or freeze bonuses and allowances for state employees, she said.
Figures released by the government’s statistics agency also show that within non-oil GDP, private sector activity grew 0.4% after expanding 0.9% in the previous three months The government sector expanded almost 1%. The construction industry shrank 1.6% after contracting 3% in the first quarter and petroleum refining expanded 5.8%.
A Bloomberg survey conducted before Saturday’s release show economists expect growth to grind to a halt this year, compared with a growth forecast of 0.5% in the previous poll.