Saudi Arabia’s Economic Landscape: Navigating Through Oil Sector Challenges
Saudi Arabia witnessed a decline in its GDP by 3.7% year-on-year in the fourth quarter, according to preliminary data released by the government, primarily due to a downturn in oil sector activities.
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This follows a 4.4% contraction in the third quarter of 2023, marking the first instance of quarterly year-on-year drop since the COVID-19 pandemic, influenced by reduced oil production and falling crude prices.
The world’s leading oil exporter, Saudi Arabia, has reduced its output to around 9 million barrels per day, significantly below its capacity, following production cuts agreed with OPEC and other producers. Consequently, the government has directed state-owned Aramco to pause its oil expansion plans.
In the fourth quarter, oil activities fallen by 16.4% compared to the previous year, while non-oil GDP and government activities saw increases of 4.3% and 3.1% respectively. Seasonally adjusted, the quarterly growth rose by 0.4% in Q4, lifted by a 2.6% increase in non-oil activities. Despite these challenges, forecasts suggest a gradual economic recovery in 2024. However, the overall economy contracted by 0.9% in 2023, with the oil sector’s downturn offsetting a 4.6% growth in non-oil activities.
The government’s ambitious Vision 2030 aims to diversify the economy, with significant progress already evident in the growth of non-oil revenues. The International Monetary Fund has projected a 1.1% contraction for 2023, signaling a cautious rebound ahead. This marks a stark contrast to 2022’s robust performance, driven by an oil price surge, which positioned Saudi Arabia as the G20’s top-performing economy.
Advancements in Women’s Economic Participation
Parallelly, Saudi Arabia celebrates a significant milestone in women’s economic empowerment, with over 476,000 commercial records now held by women, a testament to their growing prominence in the nation’s business sector.
Announced in alignment with International Women’s Day, this achievement highlights the strides made in fostering gender equality and women’s economic contribution. The Riyadh region leads in the number of women-owned commercial records, followed by the Makkah and Eastern regions, showcasing widespread entrepreneurial activity among women across diverse sectors such as trade, ICT, administrative services, and more.
This development not only reflects the societal progress within the Kingdom but also aligns with the broader goals of Vision 2030, emphasizing an expanded role for the private sector and increased non-oil growth.
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Employment grew for the 16th consecutive month as companies expanded.
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According to a recent PMI report, Qatar experienced its fastest non-energy sector growth in almost two years in June, driven by surges in both existing and new business activities.
The Purchasing Managers’ Index (PMI) headline figure for Qatar reached 55.9 in June, up from 53.6 in May, with anything above 50.0 indicating growth in business activity. Employment also grew for the 16th month in a row, and the country’s 12-month outlook remained robust.
The inflationary pressures were muted, with input prices rising only slightly since May, while prices charged for goods and services fell, according to the Qatar Financial Centre (QFC) report.
This headline figure marked the strongest improvement in business conditions in the non-energy private sector since July 2022 and was above the long-term trend.
The report noted that new incoming work expanded at the fastest rate in 13 months, with significant growth in manufacturing and construction and sharp growth in other sectors. Despite the rising demand for goods and services, companies managed to further reduce the volume of outstanding work in June.
Companies attributed positive forecasts to new branch openings, acquiring new customers, and marketing campaigns. Prices for goods and services fell for the sixth time in the past eight months as firms offered discounts to boost competitiveness and attract new customers.
Qatari financial services companies also recorded further strengthening in growth, with the Financial Services Business Activity and New Business Indexes reaching 13- and nine-month highs of 61.1 and 59.2, respectively. These levels were above the long-term trend since 2017.
Yousuf Mohamed Al-Jaida, QFC CEO, said the June PMI index was higher than in all pre-pandemic months except for October 2017, which was 56.3. “Growth has now accelerated five times in the first half of 2024 as the non-energy economy has rebounded from a moderation in the second half of 2023,” he said.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
