Maya Siddiqui/Bloomberg/Getty Images
Saudi Arabia and Russia have cut supply this year to support global oil prices.
Abu Dhabi
CNN
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Saudi Arabia’s economy has gone into reverse after the world’s biggest crude exporter cut production to support prices.
Saudi Arabia’s gross domestic product, the broadest measure of its economy, contracted 4.5% year-on-year in the third quarter of 2023, the country’s official statistics agency said this week. This is the sharpest decline since the Covid-19 pandemic in 2020. Without 3.6% growth in non-oil activities, the decline would have been even greater.
The country’s huge oil sector had been contracting for months, but the overall economy still managed 1.2% year-on-year growth in its second year Quarter.
The kingdom’s oil sector contracted 17.3% year-on-year in the third quarter – the sharpest on record since at least 2011 – due to the Voluntary cuts in oil production aimed at supporting world prices.
Saudi oil production rose to nine million barrels a day in July as the OPEC+ alliance’s biggest player joined forces with Russia to restrict supply amid signs of weaker demand due to a slowing global economy.
“We expect [oil] “Output will remain low through the end of this year, with a slow decline in early 2024,” analysts at Oxford Economics wrote in a note published on Friday.
The International Monetary Fund predicts that the kingdom will GDP will grow just 0.8% for all of 2023, down from 8.7% last year.
Saudi Arabia’s oil cuts were aimed at stabilizing global oil markets, according to Ralf Wiegert, economic director for the Middle East and North Africa at S&P Global Market Intelligence.
“In the second quarter [of] “In 2023, the risks of a global slowdown in growth will weigh on the oil markets,” said Wiegert. “Saudi leadership has decided to remove some supply from the market to address recession risks to oil demand.”
The expiration of production cuts will largely determine the Saudi economy’s ability to get back on its feet, Wiegert said, with the cuts expected to end in 2025. Saudi growth will remain sluggish at 1.1% in 2024, he added.
While other Gulf states have also come under economic pressure due to cuts in oil production, the economy of the United Arab Emirates has continued to grow.
The country’s economy minister said this week that the UAE’s GDP grew by 3.7% in the first half of the year, supported by growth in the non-oil sector.
Non-oil sales are growing at their fastest pace in four years, according to new PMI figures from S&P.
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