Saudi Arabia's economy expands in Q4 on boost from crude; non-oil growth slows

Dubai

SAUDI Arabia's economy grew in the fourth quarter of last year at its fastest rate since early 2016 due to an expansion in the oil sector, while non-oil growth was sluggish, statistics agency data showed on Sunday.

Q4 gross domestic product grew by 3.59 per cent from a year earlier. In the third quarter, annual growth was 2.5 per cent. "The oil sector led the recovery in the final quarter, reflecting stronger production, particularly at the beginning of the quarter," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The Saudi economy has suffered in recent years because of low oil prices and austerity measures aimed at reducing a huge budget deficit. In 2017, the economy shrank for the first time since the global financial crisis almost a decade earlier.

The data on Sunday showed how the kingdom's economic recovery is still heavily reliant on oil output. While the oil sector grew by almost 6 per cent year on year, growth in the non-oil sector - key for Saudi Arabia's efforts to diversify its economy - was 1.8 per cent, down from 2.1 per cent in Q3 last year.

"We expect the headline growth figure to moderate in 2019 as Saudi implements oil production cuts," Ms Malik added.

Saudi Arabia's economy grew by 2.21 per cent in 2018, government data showed in January, without breaking down Q4 figures.

Last week, state-owned Saudi Aramco announced it had agreed to buy a majority stake in Saudi Basic Industries Corp from the Saudi sovereign wealth fund, Public Investment Fund, for US$69.1 billion. The deal could boost economic growth as the sovereign fund gains more firepower to proceed with its plans to create jobs and diversify the largest Arab economy beyond oil exports.

Also, Saudi Arabia plans to issue 118 billion riyals (S$43 billion) in debt this year to help finance the national budget deficit, the country's Debt Management Office (DMO), part of the ministry of finance, said.

Saudi Arabia has borrowed extensively over the past few years to refill state coffers depleted by a drop in oil prices. At the end of 2018, it had around US$150 billion in outstanding government debt, 54 per cent of which was in local currency and the rest denominated in US dollars.

The kingdom issued US$7.5 billion in international bonds in January. It said its foreign funding this year "would be positioned in a way in which (Saudi Arabia) could secure most of its funding in the first quarter", to reduce exposure to market risks and to allow Saudi government-related issuers to tap the debt markets. REUTERS

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