Saudi Arabia’s economy contracted for the second quarter in a row as the kingdom grapples with low oil prices and its businesses struggle to cope with economic reforms.
The kingdom’s gross domestic product shrank 1 percent from the same period a year earlier, when it expanded 0.9 percent, according to official data released on Saturday. The economy had contracted 0.5 percent in the first three months of 2017.
Crown Prince Mohammed Bin Salman is leading the push to transform the biggest Arab economy at a time when crude prices are at about half their 2014 peak. But as authorities seek to reduce the kingdom’s reliance on oil, they’re also leading efforts among OPEC members and some other major producers to bolster prices by cutting output.
The kingdom’s oil GDP shrank 1.8 percent in the second quarter, weighing on overall activity.
The data also showed how non-oil industries are still struggling with efforts to overhaul the economy and shore up public finances. The non-oil GDP, the main engine of job creation, expanded below 1 percent, driven mainly by the government sector, the data show.
“What we’re seeing is stagnation in non-oil activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“Second-quarter data show still very lacklustre demand” even after the government reversed a decision to cut or freeze bonuses and allowances for state employees, she said.
Figures released by the government’s statistics agency also show:
Within non-oil GDP, private sector activity grew 0.4 percent after expanding 0.9 percent in the previous three months The government sector expanded almost 1 percent The construction industry shrank 1.6 percent after contracting 3 percent in the first quarter Petroleum refining expanded 5.8 percent.
A Bloomberg survey conducted before Saturday’s release show economists expect growth to grind to a halt this year, compared with a growth forecast of 0.5 percent in the previous poll.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.