Saudi Arabia posts highest Q1 economic growth in a decade at 9.6%

Oil activity in the kingdom rose 20.4% amid higher prices, government data showed

Streets in illuminated cityscape, Riyadh, Saudi Arabia

Saudi Arabia’s economy grew 9.6 per cent in the first quarter of 2022 to record the highest rate of growth in the last 10 years amid increased activity in the oil sector, flash estimates by the kingdom’s General Authority for Statistics (Gastat) show.

During the first quarter, activity in the kingdom related to crude oil, natural gas and refining rose by 20.4 per cent, while non-oil activity grew by 3.7 per cent, the latest data shows.

Government services activities also increased 2.4 per cent, supporting the growth of the Arab world’s largest economy.

The latest statistics come as oil prices continued to trade higher amid supply concerns due to increasing concerns about EU sanctions on Russian oil and gas imports on the back of Moscow's military offensive in Ukraine.

Brent, the global benchmark for two thirds of the world's oil, is up more than 30 per cent since the start of this year after falling from a 14-year high of almost $140 per barrel in March.

The flash estimate of quarterly GDP, as per Gastat's definition, is the process of estimating the quarterly national accounts conducted during the short period after the end of the reference quarter, when data for the quarter is still incomplete.

The process adopts simplified assumptions about "extrapolating some indicators" related to production, expenditures, income, price and foreign trade, says Gastat.

Saudi Arabia's economy has recovered strongly from the impact of the coronavirus pandemic and is forecast to grow 7.7 per cent this year from 3.2 per cent last year, helped by higher oil prices and a robust non-oil sector, Jadwa Investment said in a report last month.

The kingdom’s oil sector is projected to expand 15.5 per cent while the non-oil economy is expected to grow 3.4 per cent in 2022.

The International Monetary Fund also revised its growth forecast for Opec’s biggest producer in its latest World Economic Outlook on the back of higher oil prices.

The kingdom’s economy is now expected to grow 7.6 per cent this year, up 2.8 percentage points from IMF's January estimates, and 3.6 per cent in 2023, up 0.8 percentage points from the previous forecast, the Washington-based fund said in April.

Others have also projected strong growth for the Saudi economy this year. Japan's largest bank MUFG expects the Saudi economy to expand 7.6 per cent in 2022, while Emirates NBD forecasts 6 per cent growth.

Hiring activity has also picked up in the kingdom as the economy rebounds, a separate report by Jadwa Investment showed.

Participation of Saudi citizens in the job market rose to 51.5 per cent by the end of 2021, up marginally from 51.2 per cent in 2020, with the private sector recording a significant increase. The number of Saudis employed in the private sector rose to 1.91 million by the end of last year, said Jadwa.

“The recovery in the labour market during 2021 was associated with a significant rebound in the kingdom’s non-oil economy,” Jadwa said.

Saudi Arabia's economy is forecast to grow 7.7 per cent this year. Reuters

“With robust levels of non-oil activities growth anticipated in 2022, we expect further rises in the number of Saudi and expat workers in many sectors.”

The unemployment rate among citizens is expected to drop to 10.7 per cent in 2022 and 10.4 per cent in 2023, after declining to 11 per cent in 2021 from 12.6 per cent in 2020 as the economy continues to recover, said Jadwa.

S&P Global Ratings has affirmed Saudi Arabia’s rating at A-/A-2 with a strong payment capacity and revised its outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term.

“The positive outlook reflects our expectation of improving GDP growth and fiscal dynamics over the medium term tied to the country’s emergence from the Covid-19 pandemic, improved oil-sector prospects and the government’s reform programmes,” the agency said in March.

S&P expects the kingdom’s economy to grow 5.8 per cent this year and by an average of 2.7 per cent from 2023 to 2025.

Updated: May 02, 2022, 11:47 AM