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IMF predicts 2025 rebound for Saudi GDP

A Saudi Aramco employee at an oil facility in Abqaiq. The IMF downgraded Saudi Arabia's 2024 GDP forecast from 4% to 2.7% Reuters/Maxim Shemetov
A Saudi Aramco employee at an oil facility in Abqaiq. The IMF downgraded Saudi Arabia's 2024 GDP forecast from 4% to 2.7%
  • 2024 GDP forecast lowered
  • Reduced oil output cited
  • Non-oil economy ‘robust’

The International Monetary Fund this week lowered its 2024 forecast for GDP in Saudi Arabia to 2.7 percent, down from 4.0 percent forecast last October. 

The IMF cited the kingdom’s lower oil production, a day after state oil company Saudi Aramco surprised markets by scrapping plans to expand maximum output capacity to 13 million barrels per day (bpd). 

But in its three-monthly World Economic Outlook, the IMF raised its 2025 outlook by 1.3 percent to 5.5 percent and praised the Saudi non-oil economy as “robust”. 

The revision for 2024 reflects “temporarily lower oil production in 2024, including from unilateral cuts and cuts in line with an agreement through Opec+”, the report said. 

Saudi economic growth declined by 0.9 percent in 2023, the government’s General Authority for Statistics said this week, which was in line with IMF and analyst expectations. But fourth-quarter growth was 0.4 percent, the first rise since the fourth quarter of 2022. 

In December, the ministry of finance forecast that the economy would remain flat in 2023, caused by the output cuts and slowdown in oil prices and demand, but a rebound to 4.4 percent in 2024.

Saudi Arabia launched its Vision 2030 plan in 2016 to diversify the economy away from oil, but it still relies on oil exports to sustain its giga-projects and special economic zones, including the futuristic city Neom, the Diriyah district of Riyadh and Jeddah Central. 

On 30 January Aramco said that on government direction it was scrapping plans to expand to 13 million bpd capacity by 2027 from the current capacity of 12 million bpd – although only around nine million are in production daily. 

The decision reflects the bearish global oil market amid an excess of spare capacity, particularly with US production hitting record highs and Chinese economic growth failing to meet high expectations. 

Capital Economics said 2023 had been a poor year for the economy, but noted that non-oil activity grew 2.6 percent in the fourth quarter, the fastest rate of expansion since 2021. 

“With the recession now technically over, we expect that the Saudi economy will continue to expand over the course of 2024 – albeit at a gradual pace,” it said. 

While the non-oil economy picks up, Saudi Arabia is still struggling to lift foreign direct investment flows. 

Ministry of Investment data released on 31 January showed foreign direct investment of SAR11.4 billion ($2.93 billion) in the third quarter of 2023, which was up from SAR7.2 billion the year before. 

It was not clear if the figure used a new methodology the ministry announced in November, according to which the government said foreign direct investment in 2022 had been revised up to $33 billion from $8 billion. But the government is still far from a targeted $100 billion a year by 2030.

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