Real GDP shrinks in 2023: The Kingdom’s real GDP dipped 0.8% y-o-y in 2023 on the back of a 9% fall in oil activity, according to figures from state statistics agency Gastat (pdf). Non-oil activity rose 4.4% y-o-y and government expenditure grew 2.1% y-o-y over the same period.

The gov’t had penciled-in near-zero growth: The government had estimated that GDP would rise 0.03% in 2023, with 6% growth in the non-oil sector. The current forecast is for the economy to rebound in 2024 with 4.4% growth, according to the budget statement (pdf).

REMEMBER- The Kingdom cut oil production by 500k barrels per day in April 2023 in a bid to arrest falling oil prices. That figure became a 1 mn bpd voluntary cut by June. Though originally seen ending in December 2023, the government extended the 1 mn bpd cut through 1Q 2024 and now seems poised to continue it through June 2024, maintaining production at 9 mn bpd.

A look at Q4: Real GDP shrank 4.3% on an annual basis during the fourth quarter of the year, the figures showed. The contraction was driven by a steep 16.2% decline in oil activity, which accounts for c. 40% of GDP (and about 75% of government revenues). Non-oil activity was up 4.2% y-o-y, with government activity also reporting a 3.1% growth on an annual basis.

Steeper than initially forecast: Real GDP was expected to contract by 3.7% y-o-y in the fourth quarter of the year, preliminary data (pdf) from Gastat showed in January.

Outlook for 2024: The Finance Ministry is targeting GDP growth of 4.4% in its budget for the current fiscal year, Finance Minister Mohamed Al Jadaan said in December. The IMF has cut its 2024 growth forecast for the Kingdom to 2.7%, pointing to the combined effects of lower oil prices and production cuts.

SOUND SMART- The GDP figure was calculated using the chain-linking methodology, which Saudi Arabia leveraged for the first time in the region — and first among G20 countries. IT estimates real growth rates against a continuously updated value of goods and services produced, rather than against a fixed base year for prices and weights. This method is widely believed to result in more accurate calculations.

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