Saudi Arabia's economy has reversed due to the country's reduction in oil production.
Saudi Arabia's economy has reversed due to the country's reduction in oil production.
Following a reduction in output by the world's largest crude oil exporter to support prices, Saudi Arabia's economy has reversed course.
The country's official statistics agency announced this week that the third quarter of 2023 saw a 4.5% year-over-year decline in Saudi Arabia's gross domestic product, the broadest indicator of the country's economic health. Since the Covid-19 epidemic in 2020, that contraction has been the biggest. The decline would have been far more severe if non-oil activities hadn't grown by 3.6%.
Even though the nation's enormous oil industry had been contracting for months, the economy as a whole managed 1.2% annual growth in the second quarter.
The third quarter saw the worst year-over-year decline in the kingdom's oil sector since at least 2011 as a result of the voluntary reductions in oil production intended to support world prices.
In July, Saudi Arabia increased its oil output to nine million barrels per day as the largest member of the OPEC+ coalition teamed up with Russia to impose supply restrictions in response to indications that demand was waning due to a sluggish global economy.
With a gradual unwind in early 2024, we expect [oil] output to stay low through the end of this year, according to a note released on Friday by Oxford Economics analysts.
The kingdom's GDP grew by 8.7% last year, but the IMF projects that it would only rise by 0.8% in 2023.
Ralf Wiegert, S&P Global Market Intelligence's Economics Director for the Middle East and North Africa, stated that Saudi Arabia's oil cuts were intended to stabilize the world's oil markets.
According to Wiegert, "risks of a global growth slowdown were weighing on oil markets in the second quarter [of] 2023." In order to account for the recessionary threats to oil demand, the Saudi leadership made the decision to remove some production from the market.
Wiegert stated that the Saudi economy's potential to recover will be mostly determined by how gradually output cuts are implemented, with an end date of 2025. He also predicted that Saudi growth will remain weak in 2024, at 1.1%.
The economy of the United Arab Emirates has expanded despite economic pressure from reduced oil production in other Gulf states.
The UAE's economy minister reported this week that the non-oil sector's growth contributed to the country's 3.7% GDP growth in the first half of the year.
S&P just released PMI statistics that show non-oil sales are expanding at their quickest rate in four years.
Source Abu Dhabi (CNN)
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