The Central Department of Statistics and Information (CDSI) has released GDP data for the first quarter this year showing a real economic growth of 2.1 percent compared with 4.4 percent in the fourth quarter of last year and 6.6 percent in the first quarter of 2012. In fact, growth was the slowest since the first quarter of 2011. The slowdown was fairly broad based, with only government services growing at a faster pace than in the fourth quarter. Nonetheless, each sector of the economy grew, with the exception of the oil sector, Jadwa Investment said in its latest report.
The private nonoil sector was the main growth driver in the first quarter contributing 2.6 percentage point. The government contribution improved to 0.9 percentage point in the first quarter compared with 0.5 percentage point in the previous quarter. Finally, the oil sector contribution was -1.4 percentage point owing to lower oil production.
Nonoil GDP growth expanded by 4.4 percent year-on-year compared with 6.1 percent in the previous quarter and 4.8 percent in the same period last year. While private sector was the main driver of the nonoil sector, its contribution and growth level have started to normalize as the impact of the 2011 fiscal stimulus fade away gradually. The private nonoil sector expanded by 4.3 percent year-on-year in the first quarter compared with 5.1 percent for the same period last year. “Despite the slower growth, we expect the private sector to maintain the current level of growth supported by strong domestic demand, rising bank lending and public sector investment,” Jadwa said.
Nonoil public sector expanded by 4.9 percent year-on-year, the highest sectorial growth in the first quarter. Most of this growth was sourced from higher government services which expanded by 5.7 percent year-on-year. The contribution of government services to overall economic growth is likely to remain firm over the rest of the year as the recent labor market reform and enforcement of labor law increases demand for government services. According to Jadwa this expansion in services to translate into higher nonoil revenues for the government budget.
The oil sector contracted by 6.3 percent, the lowest quarterly reading for which data is available. This was heavily influenced by the move in oil production, which contracted by 7.9 percent over the same period. As a result, the share of the oil sector in overall real GDP shrunk to 19.6 percent compared with 21.3 percent a year earlier. As oil production is likely to gradually increase during the summer months owing to rising domestic demand, the negative effect of oil reduction on overall GDP growth will decline in the coming quarters.
While most sectors registered a positive year-on-year growth in the first quarter, their performance varies. As expected, wholesale and retail trade sector was the fastest growing sector (6.9 percent), though at a slower pace than the previous three quarters. The retail sector is likely to maintain a robust growth over the coming quarters as indicated by rising cash withdrawals from ATMs and point of sale transactions year-to-May.
Construction sector was the next fastest growing sector, at 6.7 percent year-on- year compared with 4.7 percent in the same quarter of 2012. This is due to huge activity in building infrastructure, commercial and increasingly residential projects. The large government spending allocated to boosting the provision of housing in the face of rapidly growing demand will keep construction one of the fastest growing sectors for the next few years.