The economic strength of the country, that has grown on an annual 2.9 percent within the second quarter, the Kingdom’s non-oil gross domestic product has touched down its peak point as it expands at a rapid pace.
Arab league’s largest economy fired all its cylinders to shook off the chocking impact of a rigorous drive that was followed in closely by sharp decline in the oil prices during 2014 all thanks to it’s non-oil (private sectoral) economic growth that has accelerated to its fastest pace ever in past five years during the second quarter of the year.
As per the recent data released by the General Authority for Statistics, the Kingdom’s non-oil gross domestic product grew in by 2.9 percent year-on-year, a huge rise as compared to a 2.1 percent rate of expansion achieved during the first quarter in 2019. This push forward in the non-oil economic growth is its strongest ever since the fourth quarter of 2015 since Riyadh begin to drive fiscal consolidation measures in place to counter-attack a three-year oil price slump that began in the middle of 2014.
The second-quarter rise was largely boosted by the private sectoral activity, which grew 3.4 percent in the three months to the end of June, up from 1.9 percent during the first quarter.
This rise in the private sector activity was hugely supported through largely by investments made through the kingdom’s sovereign wealth fund, the Public Investment Fund which is core to the kingdom’s efforts in the transformation of the economy. Government Sectoral growth was also broadly stabilized during the second quarter of this year, on a roundabout of 1.76 percent year-on-year from 1.74 percent in the primitive three months of the year.
According to words as stated by Monica Malik, chief economist at Abu Dhabi Commercial Bank that “they believe the most favorable fiscal backdrop, as well as the primitive signs of the government’s investment program, have been prime for this steep rise in the non-oil activity”.
The ADCB also noted and reported that “the private consumption growth remained firm at 4.1 percent notwithstanding gradually from 4.8 percent year-on-year in the first quarter of 2019. It also witnessed firming in investment activity that was also overviewed as GDP growth breakdown by sector in areas such as construction and transportation”.
The Kingdom’s economy, which largely relies heavily on the sale of oils and hydrocarbons for their revenue generation, is gradually and at constant pace recovering from the crude price shock waves as it witnessed it plummet down $30 per barrel during the first quarter in 2016.
However, the positive point to be noted is that the crude prices have since rebounded strongly to $80 per barrel in the fourth quarter of last year and is also in line hovering on a roundabout at $60 per barrel at present day, thus, powering in the government’s net finances.
Under the Overarching Vision 2030 initiative, the Kingdom is also pursuing its economic transformation program in order to curb the subsidies as well as government spending to generate alternative revenue lines through the development of a non-oil industrial base.
The Opec+, the alliance of OPEC and non-Opec member countries junction rectifier by Kingdom of Saudi Arabia and Russia, have in agreement to implement production cuts till March 2020 in an exceedingly bid to support costs and balance the international oil market. However, Saudi oil output has been below its Opec+ offer agreement of 10.3 million BPD, averaging 9.9 million BPD within the initial eight months and 9.8 million BPD within the second quarter of this year.
Saudi Arabia is aiming for 9.8 million BPD of production in Oct, which remains five percent below of what it’s needed to chop. It’s a sign that it’ll possibly maintain its vital rate of over compliance, Moody’s investor’s Service the same in September.
The kingdom’s real value throughout the second quarter softened to zero.5 percent year-on-year when increasing 1.7 percent within the half-moon of the year. A year-on-year and quarter-on-quarter drop by oil sector value, that born by three percent throughout the reported amount on the rear of lower crude production, affected the headline growth figure.
Economists have argued that growth in the non-oil sector best represents the economic strength of the country as oil value will skew the headline range because of output cuts.
“The amount of oil made could be a huge consider Saudi Arabia’s value [as] this affects the expansion. that the right approach, the healthy thanks to scrutinizing the Saudi value is to appear at the non-oil personal sector, that is growing within the country as domestic consumption is growing,” Mazen Al Sudairi, the top of analysis at Al Rajhi Capital same earlier on. In September, the kingdom’s minister of finance Mahound Al Jadaan same the non-oil economy is on target to expand 2.9 percent this year. Al Rajhi’s estimates are in line with government expectations.