Official data issued on March 10 by the Saudi General Authority for Statistics (GASTAT) showed Saudi Arabia's real GDP shrunk by 4.3 percent in the fourth quarter of 2023, with oil activity declining by 16.2 percent after major cuts in crude production.

The GASTAT said that real GDP contracted by 0.8 percent in 2023, with oil activity declining by 9 percent. But non-oil activity grew by 4.4 percent, and government activities rose by 2.1 percent.

Most economic activities saw growth rates rise during 2023. Public, social, and personal services activities recorded the highest annual growth rates amongst all sectors, at 10.8 percent, followed by transportation, storage, and communication activities, with an annual total growth rate of 7.3 percent. Combined wholesale and retail trade activities, restaurants and hotels also achieved a growth rate of 7 percent. Financial, insurance, and business services activities grew by 6.8 percent, followed by other mining activities by 5.7 percent. Crude oil and natural gas activities recorded a decrease of 9.4 percent, and oil refining activities also decreased by about 7.4 percent.

Gross domestic product

GDP reached 4.003 trillion riyals (USD1.07 trillion) last year, according to data from GASTAT. Crude oil and natural gas activities made the highest contribution rate to GDP at 25.4 percent. Government service activities contributed 15.7 percent, followed by wholesale and retail trade activities, restaurants and hotels, which contributed 9.7 percent to GDP. Manufacturing industries - excluding oil refining - added 8.8 percent to GDP and oil refining activities added 6 percent. Real estate activities contributed 5.9 percent, and net taxes on products contributed 5.4 percent to GDP.

Last year, all items that makeup GDP spending rose, except the volume of exports. The value of government final consumption grew by 5.7 percent. Both private final consumption and gross fixed capital formation grew by 5.3 percent. Regarding international trade in goods and services, the reduction in net exports affected GDP growth because exports declined by 6.5 percent. However, the value of imports grew strongly, by 9.9 percent.

Expectations of greater growth

Last February, Saudi Finance Minister Mohammed Al-Jadaan estimated that non-oil GDP growth would be more than 5 percent in the medium term, specifically at the end of 2025. Data from the Saudi Ministry of Finance also shows that the value of non-oil revenues in 2023 amounted to 457.728 billion riyals (USD122.05 billion), an annual increase of 11 percent. Non-oil revenues in the fourth quarter of 2023 amounted to 108.773 billion riyals (USD29 billion).

Saudi Arabia recently announced the extension of its voluntary reduction in oil production by one million barrels per day. This extension has ended last June 2024. This move has brought its production down to about 9 million barrels per day.

Last January, the International Monetary Fund (IMF) expected the growth of the non-oil economy in the Gulf Cooperation Council (GCC) countries that export oil and gas, including Saudi Arabia, to be about 3.9 percent in 2024 and 4.0 percent in 2025.

Last month, the international credit rating agency, Fitch Ratings, affirmed Saudi Arabia's rating of A+ with a stable outlook. It has taken into account that Riyadh has not yet been directly affected by the Israel-Gaza war and its ramifications. At the same time, the Riyadh Bank Purchasing Managers' Index survey in Saudi Arabia showed last April non-oil sector activity in Saudi Arabia to have grown at its weakest rate in two years last month as a sharp slowdown in the growth of new orders indicates future weak demand. The index recorded 55.4 points last January, down from 57.5 points in December 2023, which is the lowest reading since January 2022.

In its last report issued in November 2023, the international rating agency, Moody's Ratings, raised its expectations for growth of the Saudi economy by 4.6 percent in 2024. This is driven by the expected growth in the country's non-oil sector at rates ranging between 3 and 4 percent, and 4 percent in 2025.

Saudi Arabia announced its 2024 budget on December 6, 2023, which is the fourth trillion-dollar budget estimated by the government. In this budget, revenues amounted to 1.172 trillion riyals (USD313 billion), and expenditures amounted to 1.251 trillion riyals while the deficit was estimated to be 78,807,939,000.00 riyals (USD 21 billion).

Photo: King Abdullah Financial District in Riyadh, Saudi Arabia (by Adobe)