Saudi Arabia’s economy expanded 3.8% in first quarter boosted by non-oil growth

The pace of GDP growth was slightly softer than the initial estimate, government data shows

King Abdullah Port, Saudi Arabia. Photo: Economic Cities and Special Zones Authority

Saudi Arabia's economy grew by 3.8 per cent in the first quarter on an annual basis, boosted by growth in the non-oil sector as the kingdom continues to diversify its economy from hydrocarbons.

The country's gross domestic product expanded at a slightly softer pace in the three months to the end of March than the initial estimate of 3.9 per cent, the General Authority for Statistics said on Thursday.

The non-oil sector grew 5.4 per cent in the first three months of the year compared with the same quarter in 2022, while oil activities rose 1.4 per cent during the period, the Gastat data showed.

The oil and non-oil sectors grew more slowly than the government agency’s initial estimate of 1.3 per cent and 5.8 per cent, respectively.

The Arab world's largest economy expanded 8.7 per cent last year, the highest annual growth rate among the world's 20 biggest economies, driven by higher oil prices and the strong performance of its non-oil private sector.

Saudi Arabia's economic growth in the first quarter slowed from the 5.5 per cent annual expansion in the fourth quarter of 2022, Gastat data showed.

The decrease was primarily due to a slowdown in the oil sector in the first quarter, which rose 6.1 per cent in the fourth quarter.

On the other hand, most non-oil economic activities recorded positive growth on an annual basis in the first quarter. Community, social and personal services sector grew at the record annual pace of 12.9 per cent. It grew 2.6 per cent on a quarterly basis.

Transport, storage and communication sector followed with 9.3 per cent annual growth. The wholesale and retail trade, restaurants and hotels activities expanded 7.5 per cent.

The International Monetary Fund said this week that continued reforms and the calibration of investment programmes in Saudi Arabia will help the kingdom to strengthen its fiscal base and make it more resilient to external shocks.

Although the Saudi economy is booming, spurred on by high oil prices and a strong pick-up in private investment, uncertainty in the global economy – affecting financial conditions and crude prices – requires continued efforts to further build buffers and diversify, the fund said.

Saudi Arabia, the world's largest crude exporter, said this week it would make an additional voluntary output cut of a million barrels per day in July, which could be extended if required.

Oil prices rallied after the kingdom pledged more output cuts and the 23-member Opec+ alliance extended its production agreement into 2024.

The kingdom is in the middle of a major economic diversification drive under its Vision 2030 agenda, including a push to reduce its reliance on oil and tap into other high-growth industries to boost its economy, create more jobs and attract private investment.

Saudi Arabia is investing heavily in its non-oil sector including developing tourism, hospitality, aviation, logistics, advanced manufacturing and technology industries.