Saudi economy to clock 2.1% growth this year, says report

Rising oil production, higher public spending, steady progress of economic and social reforms and recovering oil prices are expected to push Saudi Arabia’s economic growth to 2.1 percent this year, according to a joint report by the accountancy body ICAEW and advisory firm Oxford Economics released on Wednesday.

The economic prospects this year are in contrast to the 0.9 percent contraction in 2017, when economic activity was weighed down by low oil prices, various austerity measures and restricted levels of oil production due to the OPEC-plus mandate, the report Economic Insight: Middle East Q3 2018 said.

The outlook for the Saudi economy remains strongly tied to the developments in international oil markets, the report said, adding, “Rising oil prices this year and potential supply disruptions from Libya, Venezuela and Iran, have improved the economic prospects for the Saudi economy, given the Kingdom’s role as a major oil producer with substantial spare production capacity.”

The report said non-oil sector will also support the economic growth, buoyed by pro-growth government initiatives and higher public spending.

“The $19.2 billion private sector is expected to play a key role in driving growth in the non-oil sector and cushioning businesses from the changing macroeconomic landscape,” it said.

Despite promising economic prospects, the report says certain challenges to the Saudi economy remain, notably the high local unemployment rate and the need to attract increased levels of Foreign Direct Investment to support Vision 2030 and expand the role of the private sector.