Saudi Arabia’s economy expanded by nearly 4% in the second quarter from a year earlier, thanks to rising non-oil economic growth and the return of growth in the oil sector as the Kingdom is boosting its crude production.
Real gross domestic product (GDP) rose by 3.9% in the second quarter compared to the same period of 2024, thanks to 4.7% growth in non-oil activities and a 3.8% increase in the oil sector, according to flash estimates by the General Authority for Statistics released on Thursday.
The main driver of growth in real GDP was non-oil activities, which contributed 2.7 percentage points, while oil activities contributed 0.9 percentage point, and government activities and net taxes on products also contributed positively 0.1 and 0.2 pp, respectively.
For the first quarter, the Saudi economy grew by 3.4%, driven by a 4.9% annual jump in non-oil activities, while the oil economy contracted by 0.5% year-on-year and by 1.2% quarter-on-quarter.
However, the second quarter saw rising Saudi oil production as the Kingdom leads the unwinding of the OPEC+ production cuts that began in April and accelerated in the following months.
Going forward, the International Monetary Fund (IMF) expects “robust domestic demand—including from government-led projects—will continue to drive growth despite heightened global uncertainty and a weakened commodity price outlook.”
Supported by the OPEC+ production cut phase-out schedule, overall GDP growth will accelerate to 3.5% in 2025 and 3.9% in 2026 before stabilizing at about 3.3% over the medium term, the IMF said last month.
Yet, Saudi Arabia, the world’s top crude oil exporter, is estimated to need oil prices at about $90 per barrel to balance its budget and avoid deficits.
Due to lower proceeds from oil exports, the main revenue stream for the Kingdom, Saudi Arabia’s deficit has surged above expectations this year.
The Kingdom may have to accelerate borrowings and defer planned investments in its mega initiatives such as the futuristic city of Neom, to trim the swelling deficit, analysts say.
By Tsvetana Paraskova for Oilprice.com
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