Saudi economy is starting to recover after a severe recession since the global financial crisis, not least due to the fact that the country recovers, oil prices and increases government spending.
According to data released on Sunday, the GDP for the first three months of 2018 grew by 1.2% compared to last year, this is the first expansion in five quarters. The non-oil economy increased to 1.6% from 1.3% in the previous quarter. Analysts believe that the recovery will gain strength at the end of this year amid the impact of the stimulus package of the government.
“This budget was very expansionist. We see the result of all that leads to stronger growth,” he said on Monday, a strategist at securities investment Bank EFG-Hermes Mohamed al-Hajj Bloomberg.
Strengthening the non-oil economy, the main driving force for job creation, is critical to the success of the project of crown Prince Mohammed bin Salman, aimed to reduce the dependence of the Kingdom of the revenues from crude oil exports.
But within two years the plan of the crown Prince, analysts have repeatedly noted that growth remains dependent on government spending, based on the use of oil, as businesses struggle with a variety of measures, including the taxation of value-added and withholding of tax on expatriates, which is forcing thousands of them to leave the Kingdom.
Dynamics of GDP of Saudi Arabia, Bloomberg
Data released Sunday, little changed:
• private sector growth has remained subdued with an annual rate at 1.1% after 0.4% in the previous quarter;
• the public sector has grown by 2.72%;
• GDP attributable to the sector of oil rose 0.62%.
The largest Arab economy last year decreased by 0.7% for the first time since 2009, as the Kingdom has reduced oil production in the framework of the agreement between the largest producers in the world. Non-oil GDP grew by 1.1%.
Monica Malik, chief economist at commercial Bank of Abu Dhabi, said that he expects that “in the II quarter of 2018, there will be a gradual growth of non-oil activity, with higher oil revenues will contribute to the growth of public expenditure”.
Bank loans to private companies rose in April for the first time in the last year, according to the data Bank. The amount of withdrawal from ATMs, an indicator of household spending also showed signs of recovery.
“However, the decline of foreign population and high unemployment limit the recovery of private spending,” said Malik.
Improved perspective “depends on oil prices,” she said. Brent this year, up 17% on Monday that it has reached $78 per barrel.
Authorities said that they expect that this year the growth of non-oil GDP will increase by 3.7%. This is still optimistic, according to Bloomberg Economics, which estimates the increase at 2.7%.
“GDP growth is not associated with the oil sector is likely to accelerate in the end of the year as we begin the implementation of government incentives and will feel the impact of these costs,” said Ziad Daoud, chief economist for the Middle East for Bloomberg Economics. However, the growth remained “below our estimate for the full year,” he said.