SAUDI GDP GROWTH AT 10-YEAR HIGH IN FIRST QUARTER

▶ Kingdom’s oil activity rises 20.4% on higher prices, government data shows

Saudi Arabia’s economy grew by 9.6 per cent in the first quarter of this year, its highest rate of growth over the past 10 years, amid increased activity in the oil sector, flash estimates by the kingdom’s General Authority for Statistics (Gastat) show.

Business activity related to crude oil, natural gas and refining rose by 20.4 per cent during the period while non-oil activity grew by 3.7 per cent, the latest data shows.

Activities related to government services also increased by 2.4 per cent, supporting the growth of the Arab world’s largest economy.

The latest statistics come at a time when oil prices continue to trade higher amid increasing concerns about EU sanctions on Russian oil and gas imports as a result of Moscow’s military offensive in Ukraine.

Brent, the global benchmark for two thirds of the world’s oil, is up more than 30 per cent since the start of this year, after falling from a 14-year high of about $140 a barrel in March.

The flash estimate of quarterly GDP, as per Gastat’s definition, is the process of estimating the quarterly national accounts conducted during the short period after the end of the reference quarter, when data for the three-month period is still incomplete.

The process adopts simplified assumptions about “extrapolating some indicators” related to production, expenditure, income, price and foreign trade, according to Gastat.

The Saudi economy has made a strong recovery from the coronavirus-induced slowdown and is set to expand by 7.7 per cent this year, from 3.2 per cent last year, helped by higher oil prices and a robust non-oil sector, said a Jadwa Investment report that was released last month.

The kingdom’s oil sector is projected to expand by 15.5 per cent while the non-oil economy is expected to grow by 3.4 per cent this year.

The International Monetary Fund also revised its growth forecast for Opec’s biggest producer in its latest World Economic Outlook on the back of higher crude oil prices.

The kingdom’s economy is now expected to grow by 7.6 per cent this year, up 2.8 percentage points from the fund’s January estimates, and 3.6 per cent in 2023, up 0.8 percentage points from the previous forecast, the Washington-based multilateral lender said last month.

Others have also projected strong growth for the Saudi economy this year.

Japan’s largest bank MUFG expects the Saudi economy to expand by 7.6 per cent this year while Emirates NBD has forecast growth of 6 per cent.

Hiring activity has also picked up in the kingdom as the economy continues to make a recovery, a separate report by Jadwa Investment showed.

The participation of Saudi citizens in the job market rose to 51.5 per cent by the end of last year, up marginally from 51.2 per cent in 2020, with the private sector recording a significant increase.

The number of Saudis employed in the private sector rose to 1.91 million by the end of last year, according to Jadwa.

“The recovery in the labour market during 2021 was associated with a significant rebound in the kingdom’s non-oil economy,” Jadwa said.

“With robust levels of non-oil activities growth anticipated in 2022, we expect further rises in the number of Saudi and expat workers in many sectors.”

The unemployment rate among citizens is expected to drop to 10.7 per cent this year and 10.4 per cent in 2023, as the economy continues to recover, said Jadwa. It declined to 11 per cent last year, from 12.6 per cent in 2020.

S&P Global Ratings has affirmed Saudi Arabia’s rating at “A-”/”A-2”, with a strong payment capacity, and revised its outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term.

“The positive outlook reflects our expectation of improving GDP growth and fiscal dynamics over the medium term, tied to the country’s emergence from the Covid-19 pandemic, improved oil-sector prospects and the government’s reform programmes,” the rating agency said in March.

S&P expects the kingdom’s economy to grow by 5.8 per cent this year and by an average of 2.7 per cent between 2023 and 2025.