New research says Saudi economy to grow by 2.2% this year on the back of an improvement in the global oil market
Saudi Arabia's economy is forecast to grow faster this year on the back of an improvement in the global oil market, according to Jadwa Investment.
In a new research note, Jadwa said it has revised its forecast for the Saudi economy upwards and now expects to see growth of 2.2 percent in 2018 compared to 1.5 percent previously forecast.
"The sizable rebound in growth will be partly driven by an improvement in the oil sector," it said, adding that it expects Saudi crude oil output to average 10.3 million barrels per day (mbpd) over the course of the year, up from 10.1 mbpd previously.
"As oil outages continue from OPEC members such as Libya and Venezuela, and US sanctions begin to take effect on Iran, we expect Saudi Arabia to make up a large portion of the expected deficit in oil market balances in the second half of 2018," Jadwa noted.
On the non-oil side, Jadwa said it has maintained its GDP growth forecast at 1.4 percent - compared to 1 percent in 2017.
Within this forecast, Jadwa said it still expects to see non-oil private sector growth of 1.1 percent, compared to 0.7 percent in 2017.
In fact, recently released GDP data shows that the Saudi economy is performing relatively well despite the implementation of major structural economic reform since the turn of the year, it added.
The kingdom’s economy expanded by 1.2 percent in Q1, with non-oil private sector GDP rising by 1.1 percent.
Jadwa has also revised its oil price forecast for 2018, and now expects Brent oil to average $68 per barrel (pb), up from $60 pb previously.
The research note said the combination of higher oil prices and crude oil production will push up Saudi government oil revenue to SR576 billion in 2018, against budgeted oil revenue of SR492 billion.
Jadwa noted that higher than budgeted oil revenue will not result in higher government expenditure, but will contribute to lowering the fiscal deficit. It now expects the kingdom’s fiscal deficit to decline to SR111 billion, or 3.8 percent of GDP, versus SR195 billion outlined in the 2018 fiscal budget statement.