Oil buoys Saudi growth but other sectors stutter

Saudi Arabia’s economy grew in the fourth quarter of 2018 at its fastest rate since early 2016 due to an expansion in the oil sector, while non-oil growth was sluggish, statistics agency data showed on Sunday.

Fourth-quarter GDP grew 3.59% from a year earlier. In the third quarter, growth was 2.5%.

“The oil sector led the recovery in the final quarter, reflecting stronger production, particularly at the beginning of the quarter,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The Saudi economy has suffered in recent years because of low oil prices and austerity measures aimed at reducing a huge budget deficit. In 2017, the economy shrank for the first time since the global financial crisis almost a decade earlier.

The data on Sunday showed how the kingdom’s economic recovery still heavily relies on oil output. While the oil sector grew almost 6% year on year, growth in the non-oil sector key for Saudi Arabia’s efforts to diversify its economy was 1.8%, down from 2.1% in the third quarter.

“We expect the headline growth figure to moderate in production 2019 as Saudi cuts, ”implements Malik said. oil

Saudi Arabia’s economy grew 2.21% in 2018, government data showed in January.

State-owned Saudi Aramco announced last week it had agreed to buy a majority stake in Saudi Basic Industries (Sabic) from the Saudi sovereign wealth fund, Public Investment Fund (PIF), for $69.1bn.

The deal could boost economic growth as the sovereign fund gains more firepower to proceed with its plans to create jobs and diversify the largest Arab economy beyond oil exports.

Dubai-based Arqaam Capital said in a research note on Sunday the acquisition is expected to boost credit growth, “as corporate activity on increased award momentum continues to improve particularly towards the end of the year and potentially on loans from Aramco to fund the purchase of Sabic”.

Malik said economic growth in 2019 will depend on how the PIF implements investments. “Our assumption is that the Sabic sale will boost PIF’s investments in the second half of the year,” she said.

6% the rate of year-on-year growth in the Saudi oil sector

1.8% the rate of growth in the non-oil sector, which is key to efforts to diversify