The kingdom’s economy is expected return to growth in 2024, with GDP growth accelerating to 4.1%, according to a report (pdf) by Riyad Capital out yesterday. It sees bustling non-oil activity offsetting the impact of the kingdom’s voluntary oil production cuts.

But, but, but… The non-oil private sector continues its red-hot growth streak, remaining fully in the black.

What’s on Riyad Capital’s mind: The kingdom’s economy grew at a 4.5% clip in Q3 2023 based on flash estimates after advancing just 1.2% y-o-y in Q2, the report said, expecting GDP growth to consolidate this year. It sees non-oil activities to continue accelerating next year — and notes that non-oil economic activity grew a healthy 3.9% in the quarter ending September 2023.

The non-oil economy will be the primary driver of economic growth in 2024, helping the total economy expand by as much as 3.6% next year. That’s clutch given the prospect of further oil production cuts coming as soon as tomorrow.

And that squares nicely with what businesses are reporting: The Riyad Bank Saudi purchasing managers’ index (PMI) rose for the second consecutive month to 58.4 in October, up from 57.2 in September on the back of new business orders, leading to a nine-year high in employment growth. It was the highest reading since June of this year.

REMEMBER- The economy as a whole is set to shrink for the first time on an annual basis since covid, dragged down by lower oil output. GDP looks on track to contract 0.5% y-o-y this calendar year compared to 8.7% growth in 2022, according to a report (pdf) by the World Bank earlier this month. The forecasts come on the back of voluntary oil cuts of 1 mn bpd from July until the end of the year.

Q3 saw the steepest decline: The third quarter saw the sharpest contraction since 2020 as the economy contracted 4.5% y-o-y, down from 8.6% growth in the previous year on the back of a 17.3% decline in oil activities, according to recent figures from the General Authority for Statistics (pdf).

Tags: