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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Saudi Arabia ranked first among countries for the non-oil exports of national origin with BD201 million (22%)
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Bahrain’s non-oil exports of national origin decreased by 6% to BD894 million ($2.37 billion) in Q2 2024 compared to the same period in 2023. The top 10 countries accounted for 64% of the total export value.
According to the Information & eGovernment Authority (iGA) in its Q2 2024 Foreign Trade report, Saudi Arabia was the leading destination for these exports, totaling BD201 million (22%). The US followed with BD75 million (8.4%), and the UAE with BD73 million (8.2%).
Unwrought aluminum alloys were the top exported product in Q2 2024, amounting to BD267 million (30%), followed by agglomerated iron ores and concentrates alloyed at BD159 million (18%) and non-alloyed aluminum wire at BD49 million (5%).
Non-oil re-exports
Non-oil re-exports increased by 4% to reach BD206 million during Q2 2024, compared to BD198 million for same quarter in 2023. The top 10 countries accounted for 86% of the re-exported value. The UAE ranked first with BD58 million (28%) followed by Saudi Arabia with BD39 million (19%) and UK with BD17 million (8%).
As per the report, turbo-jets worth BD65 million (32%) were the top product re-exported from Bahrain, followed by private cars with BD11 million (5%) and four-wheel drive with BD9 million (4%).
The value of non-oil imports has decreased by 4% reaching to BD1.41 billion in Q2 2024 in comparison with BD1.47 billion for same quarter in 2023. The top 10 countries for imports recorded 68% of the total value of imports.
China Bahrain’s biggest importer
China ranked first for imports to Bahrain, with a total of BD191 million (14%), followed by Brazil with BD157 million (11%) and Australia with BD112 million (8%).
Non-agglomerated iron ores and concentrates were the top product imported to Bahrain worth BD200 million (14%), followed by other aluminum oxide with BD101 million (7%) and parts for aircraft engines with BD41 million (3%).
As for the trade balance, which represents the difference between exports and imports, the deficit logged was BD310 million in Q2 2024 compared to BD322 million in Q2 2023.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
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