Saudi Arabia’s quarterly economic growth hit its highest level in nearly a decade, as activities in the oil and non-oil sectors expand.
The country’s real gross domestic product surged 6.7% in the fourth quarter of 2021 compared to the same period in 2020, and 1.6% versus the third quarter. The gains were driven by oil activities, which posted a year-on-year increase of 10.9%, while non-oil activities jumped 5.1%, and government activities rose 2.4%, according to the General Authority for Statistics.
“All economic activities showed positive growth rates on an annual basis in Q4/2021,” GASTAT said. “Petroleum refining activities expanded at the highest rates by 15.8% (17.4% q-o-q), followed by other mining and quarrying activities 11.5% (9.2% q-o-q). Crude petroleum and natural gas activities grew by 10.4% (0.3% q-o-q).”
Community, social and personal services segment was up 9.4%, while non-petroleum manufacturing shot up 8.7%, and transport, storage and communication soared 8.6%, suggesting across-the-board growth in the economy.
GDP per capita also reached its highest level in more than four years to SAR 23,737 in the fourth quarter, growing 19.3% compared to the same period in 2020.
Real GDP for the year 2021 rose 3.2% after the recession a year before, which had seen the economy contract 4.1%. The resurgence led to the most dynamic growth in the economy since 2015. GDP growth in 2021 resulted from the economy recovering from the COVID-19 crisis through the increase of non-oil activities by 6.1%, GASTAT stated.
“Economic activities showed positive growth rates in 2021, with oil refining activities expanding at the highest annual growth rates of 16.6%, followed by manufacturing, excluding petroleum refining with an annual growth rate by 9.5%, and wholesale and retail trade, restaurants and hotels (8.7%). crude petroleum and natural gas declined by 1.2%,” GASTAT added.
ECONOMIC REBOUND
In March, Standard & Poor’s Global Ratings revised Saudi Arabia's outlook to "positive" from "stable”, citing improving GDP growth and fiscal dynamics over the medium term. It also affirmed the country's rating at "A-/A-2". In its report, the rating agency forecast Saudi real GDP growth for the current year to rise 5.8%, and an average of 2.7% from 2023 to 2025.
"Higher global oil prices and rising production volumes, alongside a recovery from the COVID-19 pandemic, are supporting Saudi Arabia's fiscal and GDP growth dynamics," S&P said.
The positive outlook underscores the improved GDP growth and public finances in the medium term, linked to the kingdom’s recovery from the impacts of COVID-19, developments in the oil sector, and ongoing government reform programmes, including a focus on lowering debt.
Indeed, prudent fiscal management has been at the core of Saudi Arabia’s economic strength. In March, the National Debt Management Center (NDMC) said it completed an early redemption of a portion of the issuer's outstanding bonds and sukuk maturing in 2023, 2024, and 2026 with a total value exceeding SAR 25 billion, in addition to an issuance of new sukuk under the Sukuk Issuance Programme in Saudi riyal with a total value around SAR 26.2 billion
“This initiative is a continuation of NDMC's efforts to strengthen the domestic market and to carry on with the market developments, which have been positively reflected on growing the trading volume in the secondary market,” the Ministry of Finance said. “Further, this initiative enables NDMC to exercise its role in managing the government debt obligations and future maturities. This will also align NDMC's effort with other initiatives to enhance/optimise the public fiscal in the medium and long term.”
BUSINESS CONFIDENCE
The growth spurt has also boosted investor and business confidence.
Latest data from S&P Global (formerly IHS Markit) shows the kingdom’s non-oil private sector continued to expand robustly in March, as the latest PMI data point to marked expansions in output.
The Saudi Arabia PMI continued to signal strong growth in the non-oil economy in March, as new business and activity rose sharply in line with recovering client demand, said David Owen, economist at S&P
Global. “Supply chains also displayed strength, with lead times shortening to the greatest extent for three years. In turn, companies raised their purchasing at the fastest rate since December 2017, supporting higher capacity levels.”
Saudi traders also reported new orders grew at their fastest rate in over four years, helped by stronger improvements in purchasing and supplier delivery times.
“New business growth was similarly marked at the end of the first quarter, rising to the strongest extent since last November. Businesses continued to highlight a pick-up in economic conditions as the impact of the pandemic receded,leading to new clients and increased sales. For the first time in three months, firms also saw an upturn in new export orders, albeit a modest one,” S&P stated.
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