Saudi Arabia’s economy grows 11.8% in second quarter amid higher oil prices

Non-oil economic activity climbed 5.4 per cent during the three-month period, according to initial government data

Non-oil economic activity in Saudi Arabia grew 5.4 per cent in the three months to the end of June, government figures show. EPA-EFE

Saudi Arabia’s economy grew 11.8 per cent in the second quarter of 2022 driven by high oil prices as Russia’s military offensive in Ukraine stoked supply concerns.

Oil-related economic activity in the kingdom rose 23.1 per cent annually during the three months to the end of June, according to flash estimates released by the kingdom’s General Authority for Statistics (Gastat) on Sunday.

Non-oil economic activity climbed 5.4 per cent during the period, while government services activities increased 2.2 per cent, supporting the growth of the Arab world’s largest economy, the latest data showed.

Saudi Arabia, the world's leading oil exporter, recovered in 2021 from the impact of the coronavirus pandemic with economic activity picking up momentum this year as oil prices increased.

In the first-quarter of this year, the kingdom’s economy grew 9.9 per cent, recording its highest rate of growth in the last 10 years.

It also recorded the strongest growth rate among the world's largest economies in the January-to-March period.

The kingdom's gross domestic product grew an annual 10.4 per cent in the first three months of the year, compared with an average of 4.5 per cent recorded by the G20 economies during the period, according to data released by the Organisation for Economic Co-operation and Development last month.

The International Monetary Fund, in its latest forecast, estimates that the kingdom’s economy will grow 7.6 per cent in 2022 and 3.7 per cent in 2023 after expanding 3.2 per cent last year.

The World Bank estimates that the country's economy will grow 7 per cent this year while Jadwa Investment expects it to expand 7.7 per cent in 2022, driven by the oil price rally.

Brent, the benchmark for two thirds of the world's oil, settled 2.10 per cent higher at $103.97 a barrel at the close of markets on Friday. West Texas Intermediate, the gauge that tracks US crude, settled 2.28 per cent higher at $98.62 per barrel.

Supply concerns continue to support prices amid expectations that Russian oil supply will edge lower in the months ahead because of its conflict in Ukraine.

On the other hand, even with growing concerns about a potential global recession and rising inflation that have derailed the momentum of economic recovery, data points to oil demand holding up in the third quarter of this year at an average of 100.3 million barrels a day, up from 98.7 million bpd in the second quarter, according to MUFG Bank estimates.

The Japanese lender forecasts that Brent will average $118.88 a barrel in 2022 and $106.13 next year. It estimates WTI will end this year at an average of $114.59 a barrel and $102.25 in 2023.

Business conditions in the kingdom's non-oil private sector also continued to improve on the back of higher output and new orders, the latest data showed.

The headline seasonally adjusted S&P Global Saudi Arabia Purchasing Managers’ Index rose to 57 in June, up from 55.7 in May, the highest reading since October 2021 and slightly above the survey’s long-run average of 56.8.

Jeddah port. Saudi Arabia’s non-oil exports rose 27 per cent to $7.44bn in May. Photo: Red Sea Gateway Terminal

Saudi Arabia's non-oil exports have also surged as the country focuses on diversifying its economy.

The kingdom’s non-oil exports, including re-exports, jumped 27 per cent to 27.9 billion Saudi riyals ($7.44bn) in May, compared with 22bn riyals during May 2021, according to data released by Gastat this month.

Saudi Arabia exported higher volumes of chemicals, plastics and rubber products during the period.

Overall exports increased more than 83 per cent in May to 144.1bn riyals, up from 78.6bn riyals in the same month last year, driven by oil exports, the report said.