Non-oil economy accounted for 50% of GDP last year — a record high

Non-oil activity accounted for 50% of the Kingdom’s real GDP in 2023, fueled by a sharp increase in investments, consumption and export volumes, according to the Economy and Planning Ministry’s analysis of databy the General Authority for Statistics (Gastat). This marks the highest-ever recorded contribution of the non-oil sector to local economic growth. The new figure values the non-oil economy at SAR 1.7 tn.

Background: The Kingdom’s real GDP dipped 0.8% y-o-y in 2023 on the back of a 9% fall in oil activity. Non-oil activity rose 4.4% y-o-y and government expenditure grew 2.1% y-o-y over the same period.

THE BREAKDOWN- 2023 vs. 2022: Crude petroleum and natural gas activities delivered the highest contribution to GDP in 2023 at a 25.4% (down from 32.7%). Next up:

• Government services at 15.7% (down from 14.2%);
• Wholesale and retail trade, restaurants and hotels at 9.7% (down from 8.2%);
• Manufacturing (excluding petroleum refining) at 8.8% (up from 8.6%);
• Petroleum refining at 6.0% (unchanged);
• Real estate at 5.9% (up from 5.2%).

(Here’s the 2022 report (pdf) for reference if you want to dive deeper)

Growth drivers: Social and personal services including health, education and entertainment grew 10.8% in 2023, followed by transportation and telecoms (7.3%) and trade, restaurants and hotels (7%), financial, ins. and business services activities (6.8%), and mining and quarrying activities rose 5.7%.

Falling oil activity: Crude petroleum and natural gas activities fell 9.4% y-o-y in 2023, while petroleum refining activities declined 7.4% y-o-y. 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.

What the pundits are penciling in for 2024 and beyond:Rating agency Moody’s forecasts the Kingdom’s non-oil sector to grow at 5.5% this year on the back of major development projects and a robust economic environment, according to a recent report. S&P Global is expecting non-oil sector investments and high consumption to sustain GDP growth at 3.3% average through to 2027, according to a recent statement. Also, 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.

MEANWHILE- 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.