Economy

Riyadh revises GDP but pins hopes on non-oil activity

March 11, 2024

Vision 2030 developments such as Diriyah rely on oil income

GDP down 0.8% in 2023
Crude prices tipped to keep falling
Non-oil activity rose by 4.4%

Saudi Arabia has revised its real GDP figure for 2023 to a contraction of 0.8 percent, from a contraction of 0.9 percent.

Oil production cuts hit the Saudi economy last year, while analysts are predicting a slide in crude prices this year.

Oil activities decreased by 9 percent in 2023, while non-oil activities increased by 4.4 percent, the government’s General Authority for Statistics said on March 10.

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The official figures, revised since January, said GDP in the fourth quarter of 2023 was down by 4.3 percent year on year, in contrast to the previous estimate of 0.4 percent growth. This was offset by another revision to the figure for the first quarter, which now stands at 3.2 percent growth.

Saudi Arabia introduced oil production cuts in 2023, in an effort to prop up global prices during a period of slipping demand. This month Opec+ producers led by Saudi Arabia and Russia extended their crude supply cuts for another three months.

Government ministers and analysts have stressed the strength of the kingdom’s non-oil economy.

In its latest World Economic Outlook, the International Monetary Fund raised its 2025 forecast for Saudi GDP growth by 1.3 points to 5.5 percent, describing the non-oil economy as “robust”.

But the IMF also lowered its 2024 forecast to 2.7 percent growth, down from 4 percent in its previous report last October.

Analysts at Swiss private bank Julius Baer said on March 11 they expect oil prices to fall further over the coming year, despite producer efforts to prop up prices.

“We expect that today’s fundamental trends will persist and thus believe that oil prices should fall back into the $70s range later this year,” said Norbert Rücker, head of economics and next generation research at Julius Baer.

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

“The Middle East faces escalating pressures, with most economies poised for a slowdown and regional fiscal policies remaining relatively unsupportive this year,” Scott Livermore, chief economist at Oxford Economics Middle East, said in a March 11 note.