The outlook for Saudi Arabia’s economy looks strong amid favourable fiscal tailwinds, strong commodity prices, and a flurry of Vision 2030-related activity that are under way.
This was evident in the latest reading for the economy. Gross domestic product in the third quarter of 2021 rose by 7% in real terms compared to the same quarter of 2020.
Compared to the second quarter of 2021, real GDP growth had climbed 5.7% in the third quarter, according to the latest estimate by the General Authority for Statistics (GaStat).
Economic growth was mainly driven by oil activities, which increased by 9.3% year on year (12.7% quarter on quarter). Non-oil activities grew by 6.3% (yoy) and 2.6% (qoq), government activities by 2.7% (yoy) and1.1% (qoq).
"Domestic demand developed very strongly in Q3/2021 with private final consumption growing by 9.7% (yoy; 2.8% qoq) and gross fixed capital formation growing by 13.5% (yoy; 3.6% qoq)," according to GaStat.
"External demand was also an important growth factor in Q3/2021 with exports growing by 14.2% (yoy; 7.3% qoq). Imports grew by 8.3% (yoy), but declined by 2.8% compared to the previous quarter. Government final consumption expenditure decreased by 1.1% on an annual basis, but expanded by 0.8% compared to the previous quarter."
RECOVERY ON TRACK
The growth was broad-based, highlighting the breadth of economic recovery underway.
Petroleum refining was the best performer during the third quarter of 2021 compared to the same period a year before, rising 19.2%.
Finance, insurance and business services was up 13.4%, wholesale and retail trade, restaurants and hotels expanded 10.8%, while crude petroleum and natural gas rounded up the five best performing sectors with an 8.5% rebound during the period.
The non-oil sector contributed 48.4% to economic growth in terms of gross value added at current prices, while oil activities accounted for 32.9%, and government activities’ share was 18.7%.
On the level of economic activities and their contribution to GDP, crude petroleum and natural gas activities represented 26.6% of the share,followed by government services activities at 17.4%, and wholesale and retail trade, restaurants and hotels activities contributing 9.3%, GSTAT data shows.
LABOUR MARKET IMPROVEMENT
In tandem with economic growth, the labour market has also shown remarkable improvement. The unemployment rate of the kingdom’s working age population reached 6.6% in the third quarter of 2021, 1.9 percentage points lower than the same period last year, according to GaStat.
Encouragingly, Saudi women’s labour force participation rate rose to 34.1% in the third quarter, up 1.7 percentage points compared to the same period in 2020, and the unemployment rate edged down 0.4 percentage points to 21.9%.
Among Saudi men, the participation rate was 65%, down 0.7 pp, and the unemployment rate edged down 0.2 pp to 5.9% in Q3/2021 versus the previous quarter.
Indeed, the third quarter of 2021 saw marked differences in principal labour market indicators among males and females (15 years and over).
“Female participation rate was 35.9%, up 2.1 pp from Q2/2021.Concurrent with more females entering the labour force, the female employment-to-population ratio increased to 29.7%, up 1.7 pp from the Q2/2021, while the female unemployment rate remained unchanged at 17.1% in Q3/2021,” GaStat noted.
However, the male participation rate was 78.3% in the third quarter, down slightly by 0.9 pp from the previous quarter, while the unemployment rate was 3.3%, down slightly by 0.2 pp from the previous quarter.
ECONOMIC SENTIMENT
Despite rapid improvements in the global economy, thanks to higher vaccination rates, the latest Omicron variant has dampened sentiment across the world.
In Saudi Arabia, non-oil firms were wary of the new wave, sending the latest purchasing manager index lower, according to IHS Markit.
“The signalled rise in new business was sharp, but nevertheless much softer than those seen in recent months. Several panellists suggested that concerns about the spread of the new Omicron variant had impacted customer spending and led some firms to withhold orders,” the IHS report stated.
But the muted sentiment could prove shortlived, as Omicron is reportedly less severe compared to previous iterations of the virus. There are also suggestions that the virus could be downgraded from a pandemic to an endemic on higher vaccinations and greater immunity.The world reached a milestone with more than 50% of the population fully vaccinated.
Meanwhile, Saudi Arabia now has 67.1% of its citizens fully vaccinated, according to Our World In Data, and the kingdom has administrated just under 53 million doses to date.
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