JEDDAH: Saudi Arabia’s gross domestic product, adjusted for inflation, rose 1.4 percent from a year earlier in the second quarter of 2016, after growth of 1.5 percent in the first quarter. It was the slowest growth since 0.3 percent in the first quarter of 2013.
The oil sector expanded 1.6 percent from a year ago, slowing from 5.1 percent growth, while the non-oil sector grew 0.4 percent, recovering from a fall of 0.7 percent in the previous quarter. The private sector grew just 0.1 percent in the second quarter.
A regional analyst told Arab News: “What looks clear is that the Saudi economy has, at least to date, avoided a technical recession. This is reflective of the strong momentum of the oil sector as well as the structural drivers (demographics, diversification) in the non-oil sector.”
He added: “Going forward, this year and potentially the first half of next will be the crunch time for the paradigm shift the government wants to achieve.”
The analyst said: “It looks likely that oil sector growth will begin to moderate if any sort of output control among OPEC (and beyond) materializes. At the same time, the non-oil economy will be tested by the new fiscal consolidation measures.
“Growth is likely to be historically low, but this should begin to lay the foundations for a rebound at some point next year as the private sector adjusts and oil prices (hopefully) rebound.”
Reuters further reported that the latest figures suggested the Saudi economy was faring better in the face of oil’s slump than many people feared.
Nevertheless, analysts told Reuters that Saudi data could be erratic — growth for the fourth quarter of 2015 was ultimately revised down to 1.8 percent from an original estimate of 3.6 percent — and said there could be a similar revision in this case.
“There ís a good chance that the figures will be revised down,” said Jason Tuvey, Middle East economist at London-based Capital Economics.
Other indicators such as imports suggested the non-oil private sector may have slowed further than the government data showed, he said.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said she had expected some improvement in the second quarter but that the non-oil sector’s positive growth was surprising.
She also said second-quarter data for the non-oil sector might eventually be revised lower.
The non-oil sector looks set to contract for 2016 as a whole, she said.