Saudi Arabia witnesses growth in non-oil sector despite contraction in GDP
(MENAFN) In the second quarter of 2024, Saudi Arabia experienced a notable 4.9 percent year-on-year growth in non-oil activities, surpassing the initial estimate of 4.4 percent released at the end of July. This robust performance in the non-oil sector was crucial as oil activities faced a significant decline, decreasing by 8.9 percent year-on-year. This sharp drop in oil sector performance led to a 0.3 percent contraction in Saudi Arabia’s GDP for the second quarter compared to the same period last year. Despite this, there was a positive growth of 0.9 percent when compared to the first quarter of this year. Initial forecasts had anticipated a larger contraction of 0.4 percent in GDP for the second quarter on an annual basis.
The decline in Saudi Arabia's GDP was influenced by ongoing oil production cuts agreed upon by the OPEC+ alliance and the drop in global oil prices. In the first quarter of 2024, Saudi Arabia’s GDP had already contracted by 1.7 percent, reflecting the impact of reduced oil activities. Looking ahead, the International Monetary Fund (IMF) forecasts a 4.4 percent growth for the Saudi economy in the medium term, with an expected increase to 4.7 percent in 2025 as the OPEC+ oil production cuts are gradually lifted. This forecast is a positive outlook compared to the 8.7 percent growth in 2022 driven by higher oil prices, and the 0.8 percent contraction in 2023 due to falling oil prices and the Kingdom's production cuts.
The IMF acknowledged the significant progress Saudi Arabia has made in its economic transformation and noted that the Kingdom's economy has remained resilient despite regional geopolitical tensions. Saudi banks and non-financial companies are seen as capable of withstanding challenging economic scenarios, although the IMF recommends further efforts to bolster non-oil revenue streams to ensure sustainable economic growth.
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