Saudi economy contracts for third quarter in a row

Alamy via Reuters

• Activity down 1.8% in Q1 2024
• 10.6% decline in oil activities
• IMF reduces outlook

Saudi Arabia’s economy contracted by 1.8 percent year on year in the first quarter of 2024, while growth in non-oil activities slowed to its lowest rate in a year, statistics released this week show. 

The country’s GDP fell for the third quarter in a row, although the drop eased from the 4.3 percent contraction in the fourth quarter of 2023 and the 3.2 percent fall in the third quarter. 

“This decrease was primarily driven by a 10.6 percent decline in oil activities,” the General Authority for Statistics said in its latest report. 

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Saudi Arabia has implemented oil output cuts over the past year in an effort to push up global oil prices. The policy caused an economic contraction of 0.8 percent over 2023, but the government says the non-oil economy rose to 50 percent of GDP for the first time.

Non-oil growth was at 2.8 percent, down from 5.3 percent a year before, when the economy was booming as the country emerged from the Covid-19 pandemic. 

The International Monetary Fund cut its estimate for Saudi economic growth in 2024 to 2.6 percent in its most recent World Economic Outlook, but raised its expectation for 2025 to 6 percent. 

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Finance minister Mohammed Al-Jadaan told a World Economic Forum meeting in Riyadh this week that the kingdom would adjust its Vision 2030 plan to transform its economy as needed, scaling back some projects and accelerating others. 

Doubts have begun to surface about the financial viability of some projects. 

The government is now looking at three years of budget deficits, putting strains on the Public Investment Fund’s ability to maintain funding for the $1.25 trillion giga-projects at the heart of Saudi Arabia’s massive economic transformation plan. 

The IMF recently raised its estimate for Saudi Arabia’s fiscal breakeven price to $96.2 per barrel of oil from $86 last year, but predicted that would ease to $84.7 in 2025.