Saudi Arabia’s Q4 GDP shrinks 3.7 per cent year-on-year

Saudi Arabia’s real gross domestic product (GDP) shrunk 3.7 per cent in the fourth quarter, government data showed on Wednesday, marking a second consecutive quarter of contraction, as a decline in oil activities weighed.

The kingdom’s GDP shrunk 4.4 per cent in the third quarter of 2023, its first quarterly contraction since the COVID-19 pandemic, hurt by cuts to oil production and lower crude prices.

Saudi Arabia, the world’s largest oil exporter, is pumping around 9 million barrels per day (bpd), well below its around 12 million bpd capacity after it cut production as part of an agreement with OPEC and other oil producers.

The government has ordered state firm Aramco (2222.SE) to halt its oil expansion plan and to keep maximum capacity at 12 million barrels per day, 1 million bpd below a target announced in 2020, the company said on Tuesday.

Oil activities were down 16.4 per cent in the fourth quarter versus the previous year, estimates from the General Authority for Statistics showed, while non-oil GDP grew 4.3 per cent year on year and government activities increased 3.1 per cent.

The kingdom’s economy contracted 0.9 per cent in 2023, the data showed, pulled lower by the oil sector while non-oil activities grew by 4.6 per cent.

In its latest budget, the government had estimated overall GDP growth of 0.03 per cent in 2023, with non-oil growth forecast at almost 6 per cent. It projects growth of 4.4 per cent this year.

The International Monetary Fund on Tuesday estimated Saudi Arabia’s economy contracted 1.1 per cent in 2023, adding this would result in a slower rebound this year.

Saudi Arabia needs hundreds of billions to achieve the objectives of its economic transition plan known as Vision 2030, which puts an expanded private sector and non-oil growth at the centre of the kingdom’s future development agenda.

It has already tapped debt markets for $12 billion so far this year to help plug a projected budget deficit of 79 billion riyals ($21.07 billion) in 2024 as it boosts spending to bolster the domestic economy.