Saudi Arabia records slower economic growth in first quarter

SAUDI Arabia’s economy expanded at a slower pace in the first quarter of 2023 as the oil sector grew at its lowest rate in more than a year.

Gross domestic product grew an annual 3.9 per cent in the opening three months of the year, according to preliminary data released by the General Authority for Statistics. That compares with 5.5 per cent in the previous quarter.

Economic expansion was driven by a 5.8 per cent increase in non-oil activities, the engine of job creation, the data showed on Sunday (May 7). Oil activities’ growth was 1.3 per cent, compared with 6.1 per cent the previous quarter.

The International Monetary Fund (IMF) expects the Saudi economy to grow 3.1 per cent this year, a significant slowdown from the 8.7 per cent it recorded in 2022. The IMF has warned that Saudi Arabia won’t be able to balance its budget this year if average oil prices are below US$80 a barrel.

The country’s de facto ruler, Crown Prince Mohammed bin Salman, is halfway through his multi-trillion-dollar vision to transform and diversify the economy of the world’s largest crude exporter, under a plan known as Vision 2030. In addition to jump-starting non-oil sectors such as tourism, the country wants to boost the private sector’s share of the economy to 65 per cent from the low 40s. 

Much of this ambition hinges on Saudi Arabia’s ability to attract foreign investments, which has so far not met expectations. That’s contributing to many analysts increasing their forecasts of the oil price that the kingdom needs to balance its budget while continuing to spend on Vision 2030-related expenditures and projects. BLOOMBERG