Saudi Arabia’s third-quarter GDP grows at the fastest pace since 2012

Buoyant oil prices have helped boost the kingdom’s economic prospects

Seasonally adjusted quarterly real gross domestic product grew 5.8 per cent, quarter on quarter. AP

Saudi Arabia’s economy grew an annual 6.8 per cent in the third quarter, the fastest pace since 2012, as the world’s biggest oil exporter benefited from higher crude prices.

Its seasonally adjusted quarterly real gross domestic product grew 5.8 per cent, quarter on quarter, according to the kingdom’s General Authority for Statistics.

“This increase in GDP was a result of high growth in oil activities by 12.9 per cent. Non-oil activities increased 1.6 per cent and government activities recorded a growth of 1.4 per cent,” the government agency said.

GDP in the Arab world’s largest economy is expected to grow 2.4 per cent this year and 4.8 per cent in 2022, owing to the country’s swift and effective response to the pandemic and growth in its non-oil sectors, the International Monetary Fund said in July.

Saudi Arabia’s IHS Markit Purchasing Managers’ Index was 57.7 in October, the second-highest reading recorded since the start of the pandemic. Despite slipping from 58.6 in September, it underlined a sharp improvement in the kingdom’s business conditions. A reading above 50 indicates economic expansion, while anything below points to a contraction.

The kingdom’s non-oil economy is projected to grow 4.3 per cent this year, the IMF said.

Oil prices are at multi-year highs and gained more than 60 per cent since the start of the year, helping to shore up the kingdom’s finances. The country recorded a budget surplus of 6.7 billion Saudi riyals ($1.79bn) during the third quarter, earning 243.3bn riyals in revenue, its first since 2019. Oil revenue soared 60 per cent annually to 147.9bn riyals, the ministry said.

Non-oil revenue was up 33 per cent to 299.5bn riyals this year, while oil revenue surged by 25 per cent. The kingdom’s non-oil PMI continued to grow in October as it touched 57.7, the second-highest reading recorded since the start of the pandemic.

Oil-exporting countries are expected to have large surpluses this year and next amid rising crude revenue, according to a report by the Institute of International Finance.

“Net hydrocarbon exports and hydrocarbon government revenues account for more than half of total exports and total government revenues, respectively in major oil exporters,” the IIF said.

“Consequently, the fiscal deficits of 2020 will shift to large surpluses in 2021 and 2022 in most oil exporters, except in Nigeria, Kazakhstan and Algeria.”

The kingdom’s economy “looks to be ending the year on a strong footing”, Capital Economics said in a research note on Tuesday.

“With oil production set to rise further, the remaining virus-related restrictions to be relaxed, and the possibility of the government loosening fiscal policy, the recovery will gather momentum in 2022,” it said.

Capital Economics forecasts the kingdom’s economy to expand 7.3 per cent in 2022.

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