City view of Riyadh, the capital of Saudi Arabia.
Harry Järvelainen Photography | moment | Getty Images
Saudi Arabia’s economy, one of the fastest growing G20 countries, slowed in the second quarter as crude output cuts and oil prices plunged.
Riyadh’s GDP grew an annualized 1.1% in the second quarter, according to the Saudi General Authority for Statistics said on mondaydown from 3.8% in the previous quarter and up from 11.2% In the same period of 2022,
The non-oil sector – where Saudi Arabia is directing its socioeconomic reforms under Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification program – grew by 5.5% in the second quarter.
But hydrocarbon-dependent Riyadh reported a 4.2% loss in non-oil gross domestic product in the second quarter, bearing the brunt of low global crude prices and voluntary oil production cuts. Oil prices soared last year as Moscow’s full-scale invasion of Ukraine and subsequent international sanctions cut many Western consumers off supplies of Russian crude. The world’s top oil exporter at the time benefited doubly, both from rising prices and from increased demand for Saudi Arabia’s own crude, which is qualitatively comparable to Russia’s main supply.
Commodities did little to support the Saudi economy in the first half of this year, with oil prices below $80 a barrel amid macroeconomic concerns, a slump in demand and China’s prolonged exclusion from Spartan COVID-19 restrictions. Brent futures contracts for delivery in September were trading at $84.89 a barrel at 9:10 a.m. London time, down 10 cents from Friday’s settlement.
Saudi Arabia is also bearing the bulk of additional voluntary crude oil production cuts agreed by some members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+. Some OPEC+ nations are cutting 1.66 million barrels per day through the end of 2024, with Saudi Arabia slashing production by a further 1 million barrels per day in July and August. Fellow giant and petropolitics ally Russia is also cutting its crude exports by 500,000 barrels per day next month.
International Monetary Fund had termed Riyadh Fastest growing G20 economy in 2022With an overall expansion of 8.7% over the previous year. The fund last week forecast a Saudi recession, when it cut its GDP growth forecast for Riyadh from 8.7% in 2022 to 1.9% in 2023. July 25 issue of its World Economic Outlook,
“Saudi Arabia’s downgrade for 2023 reflects production cuts announced in April and June in line with an agreement through OPEC+,” it added, stressing that “private investment, including ‘giga-project’ implementation, strong non- continues to support oil.” GDP growth.
The Saudi slowdown is set to impact the overall performance of the Middle East and Central Asian region, where the IMF now expects growth of only 2.5% this year, down from 5.4% in 2022.