The worst may be over for Saudi economy
dubai — Saudi Arabia’s economy is starting to emerge from the worst slowdown since the global financial crisis, if only due to rebounding oil prices and higher public spending.
Gross domestic product grew 1.2 per cent in the first three months of 2018 compared with a year ago, the first expansion in five quarters, according to data released on Sunday. The non-oil economy grew 1.6 per cent from 1.3 per cent in the previous quarter, and analysts said the recovery will gain momentum later in the year as the impact of a government stimulus package filters through.
“The budget was very expansionary,” Mohamad Al Hajj, a Dubai-based equities strategist at investment bank EFGHermes, told Bloomberg TV on Monday, listing steps that included cash transfers and handouts to offset the impact of subsidy cuts. “You’re seeing the results of all of that translating into stronger growth numbers.”
Bolstering the non-oil economy, the main engine for job creation, is crucial to the success of Crown Prince Mohammed Bin Salman’s blueprint to wean the kingdom from its reliance on income from crude exports — a feat rarely accomplished by large commodity producers.
But more than two years into the prince’s plan, analysts have repeatedly noted that growth remains reliant on oil-driven government spending, as businesses struggle with measures, including value-added taxation and levies on expatriates that drove thousands of them to leave the kingdom.
The biggest Arab economy contracted 0.7 per cent last year for the first time since 2009, as the kingdom reduced its oil output as part of an agreement among major global producers. — Bloomberg