Saudi Arabia’s economy grew an annual 1.5 per cent in the second quarter of 2021, the first expansion since the onset of the Covid-19 pandemic last year, with a sharp rise in the kingdom’s non-oil economy underpinning the rebound.
Growth for the three months to the end of June was driven by a 10.1 per cent expansion in the country's non-oil gross domestic product, according to the latest flash data released by the government on Monday.
Saudi Arabia’s non-oil economy contracted 10.3 per cent in the second quarter of 2020, at the peak of the economic disruption caused by the pandemic, according to the kingdom's General Authority for Statistics.
The oil sector shrunk 7 per cent in the three months through to the end of June. Oil GDP contracted 5.3 per cent in the same period of last year amid lower crude prices.
Seasonally adjusted real GDP grew 1.1 per cent in the second quarter, compared with a 0.5 per cent contraction in the first quarter of 2021, according to government data.
The increase in GDP was a result of oil and non-oil activity growth of 2.5 per cent and 1.3 per cent, respectively, while government activities contracted 2.6 per cent.
The expansion in Saudi Arabia’s GDP in the second quarter "was driven by the unwinding of the voluntary oil output cuts and the easing of virus-related restrictions supported domestic activity”, Capital Economics said in a research note on Monday.
“With the Opec+ impasse now resolved, oil production will be raised further and remaining virus restrictions are being relaxed. The economic recovery looks set gather pace over the second half of the year.”
Saudi Arabia's swift response to curb the spread of Covid-19 has helped it to recover from the pandemic-induced slowdown. The Arab world’s largest economy is now expected to grow 2.4 per cent this year and 4.8 per cent in 2022, according to the International Monetary Fund.
The kingdom's non-oil economy is projected to grow 4.3 per cent this year, according to the fund. Capital Economics is more bullish and has forecast an expansion of 4.8 per cent this year and 6.3 per cent in 2022.
“This is much stronger than the consensus forecasts,” it said on Monday.
Support from Saudi Arabia’s sovereign fund, the Public Investment Fund, and strong domestic demand are helping to propel economic growth.
The PIF is a central plank of the Vision 2030 initiative, which seeks to diversify the economy, nurture local industry, create jobs and reduce the kingdom's reliance on oil revenue.
In January, the PIF unveiled a five-year strategy under which it intends to double its assets to $1.07 trillion and invest a minimum of $40bn a year into the kingdom's economy until 2025.
The investment is expected to create 1.8 million jobs and contribute $320bn to Saudi Arabia's non-oil economy.