Font Size

- Aa +

Sat 27 Jul 2019 12:13 AM

Font Size

- Aa +

Saudi economic growth forecast revised down on oil output

Jadwa Investment says it now sees growth at around 1.6% for 2019, down from 2% previously forecast

Saudi economic growth forecast revised down on oil output

Saudi Arabia's economic growth is likely to be less than previously forecast due lower than expected oil production in the Gulf kingdom, according to new research.

Jadwa Investment said its economic forecast for the kingdom has been revised down wholly on the account of developments related to the oil market.

It previously expected overall growth to hit 2 percent in 2019, but a downward revision in oil sector GDP means that it now sees growth at around 1.6 percent.
   
Lower than previously forecasted Saudi oil production will push oil GDP to a slender 0.3 percent growth in 2019, Jadwa said, adding that on the non-oil side, it sees higher growth at 2.7 percent compared to 2.3 percent previously.

Within this forecast, Jadwa said it expects to see non-oil private sector growth to improve to 2.4 percent, compared to 1.7 percent in 2018.
   
"Our upwardly revised non-oil private sector GDP reflects a general improvement in a number of high frequency economic indicators and a pick-up in activity as demonstrated by recently released Q1 GDP data. In fact, our non-oil private sector composite index shows that economic activity remains elevated in Q2," the research noted.

Jadwa added that lower yearly Brent oil prices and crude oil production will result in lower government revenue than previously forecasted. As a result, it sees a widening of the fiscal deficit to SR196 billion (6.4 percent of GDP) in 2019.
   
"Overall, it seems that the consolidation of efforts in striving towards the goals of the Vision 2030 (Vision), as well as the targets set under the National Transformation Program (NTP) have paved the way for pick up in momentum for the Saudi economy. That said, exogenous factors have become more prominent in relation to the kingdom’s immediate economic outlook. Specifically, global economic developments, in particular with regards to the US and Chinese trade dispute, as well as regional geopolitical tensions, stand out as the main risks to our forecast," Jadwa said.

Saudi Arabia recorded a surplus of SR27.8 billion in Q1, driven by both oil and non-oil revenues.

The results marked the first time since 2014 that the kingdom posted a surplus.