Saudi Arabia GDP contracts but non-oil growth rises

Reuters/Hamad I Mohammed

• First-quarter 2024 figures
• GDP drop less than estimates
• Oil activity fell by 11% in 2023

Saudi Arabia’s economy contracted by 1.7 percent year on year in the first quarter of 2024 due to ongoing oil production cuts, but non-oil growth was up 3.4 percent in the same period, according to adjusted figures released this week.  

Last week Opec+ agreed to extend its existing crude output cuts into 2025 in a bid to shore up crude prices which are under pressure from surging North American supply. 

The cuts, which began in 2022, caused a 0.8 percent contraction in the Saudi economy in 2023 due to the continuing dominance of oil and gas revenues in Saudi finances. 

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The General Authority for Statistics said in its adjusted quarterly report that an 11 percent decline in oil activities over the year was behind the GDP decrease of 1.7 percent.

The contraction during the first three months of 2024 was less than 3.7 percent recorded for the fourth quarter of 2023. 

But the statistics authority added that “non-oil activities and government activities achieved growth rates of 3.4 percent and 2 percent respectively”. 

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In May the first-quarter GDP decline was initially estimated at 1.8 percent and non-oil growth at 2.8 percent. 

The government says the non-oil economy accounted for 50 percent of 2023’s GDP, in line with reform plans to diversify the economy and ultimately decrease reliance on oil. 

But lower oil prices have been the main factor causing the government to delay some of the giga-projects at the heart of the transformation plan, as it now faces three years of budget deficits. 

Saudi Arabia currently faces an oil breakeven price of around $96 per barrel, though the IMF predicts it will ease next year to $84.7.