Saudi Arabia's economy grows 8.6% in third quarter as oil activities accelerate

The kingdom is benefiting from higher oil prices, rising oil production and the government’s reform programme

A Saudi Aramco oil facility near Al Khurj, south of Riyadh. AFP

Saudi Arabia's economy expanded by 8.6 per cent in the third quarter of 2022, driven by higher oil prices and government reforms, the kingdom's statistics body said.

Growth in the Arab world's biggest economy in three months that ended in September is up from 6.8 per cent from a year ago, the General Authority for Statistics (Gastat) said in its flash estimates report on Monday.

Oil activities grew 14.5 per cent, up from 9.3 per cent a year ago, Gastat said. This was, however, down from the 22.9 per cent surge in the second quarter of 2022. Oil activities in the kingdom include crude oil, natural gas and refining activities.

Non-oil activities grew by 5.6 per cent year-on-year, down from 6.3 per cent in the third quarter of 2021, and government services activities improved 2.4 per cent annually, also down from 2.7 per cent in the same period a year ago.

The kingdom has now posted six straight quarters of economic expansion after the Covid-19 pandemic stalled activities. However, third-quarter growth slowed from the 12.2 per cent the economy posted in the previous three-month period.

On a seasonally-adjusted basis, GDP grew 2.6 per cent, lower than the 5.7 per cent expansion posted in the third quarter of 2021, the report showed. Oil activities rose 5.8 per cent, more than half of the 13.1 per cent growth posted a year ago, Gastat said.

Non-oil activities grew 0.2 per cent year-on-year, compared to 1.8 per cent a year ago, while government services rose 1.1 per cent against a 2.2 per cent growth in the third quarter of 2022, it added.

Saudi Arabia's growth is the result of “higher oil prices, rising oil production and the government’s reform programme”, Riyadh-based Al Rajhi Capital said in a note on Monday.

International Monetary Fund managing director Kristalina Georgieva described the kingdom as a “bright spot amidst the global turmoil” at the meeting of the Financial and Economic Co-operation Committee of the GCC earlier this month.

While oil remains the pillar of Saudi Arabia's economy, it is banking on its Vision 2030 strategy that aims at diversifying the country's economy and reducing its dependence on crude. The kingdom has been aggressively tapping into other industries, most notably technology to attract more foreign investments.

Business activity in Saudi Arabia's non-oil private sector economy continued to improve in September, with the seasonally-adjusted S&P Global purchasing managers’ index clocking in at 56.6 last month as output and new orders rose sharply on strong demand amid inflation worries and global macroeconomic headwinds.

Last month, S&P Global Ratings affirmed Saudi Arabia’s rating at A-/A-2 with a positive outlook as the Arab world’s largest economy continues to recover from the Covid-19 pandemic on the back of higher oil prices, rising oil production and the government’s reform programme.

The A-/A-2 rating indicates the kingdom's strong capacity to meet its financial commitment.

Overall, GCC economies are projected to grow 6.9 per cent in 2022, driven by stronger hydrocarbon and non-hydrocarbon industries, the World Bank said on Monday.