A 15.4 per cent rise in oil sector activities — which include the production of crude, natural gas and refining operations — drove the sharp increase in gross domestic product, said the General Authority for Statistics (Gastat).
Non-oil activities increased by 5.4 per cent during the 12-month period to the end of December while government services activities were up 2.2 per cent, Gastat said.
The 8.7 per cent annual growth is slightly higher than the 8.5 per cent expansion forecast by Finance Minister Mohammed Al Jadaan in December.
On quarterly basis, Saudi Arabia’s GDP expanded 5.4 per cent in the fourth quarter of last year, compared with the same period of 2021.
Non-oil activities for the three-month period to the end of December grew by 6.2 per cent while oil activities expanded by 6.1 per cent, according to Gastat's flash estimates.
Government services activities during the period grew by 1.8 per cent a year.
Seasonally adjusted real GDP grew by 1.5 per cent in the fourth quarter compared to the third quarter of 2022, driven by a 1.7 per cent rise in non-oil activities.
Government sector services grew by 0.5 per cent while oil activities decreased by 0.3 per cent a quarter, Gastat said.
“The increase in oil output was concentrated in the front half of the year, with greater than 20 per cent annual growth in Q1 [first quarter] to Q2 before slowing to 6.1 per cent growth year on year in Q4,” said Edward Bell, senior director of market economics at Emirates NBD.
The fourth-quarter GDP growth was Saudi Arabia’s seventh consecutive three-month expansion after the Covid-19 pandemic slowed economic activity in Opec’s biggest oil producer.
Saudi Arabia’s preliminary estimates for 2023 indicate GDP growth of 3.1 per cent, with inflation at 2.1 per cent.
The International Monetary Fund expects the kingdom’s economy to grow by 2.6 per cent this year and by 3.4 per cent in 2024.
The kingdom, the world's largest exporter of oil, benefitted from the rally in crude prices last year after Brent, the global benchmark for two thirds of the world's oil, rose by about 10 per cent, following a 50 per cent gain in 2021.
Brent hit a 14-year high of close to $140 a barrel in March last year after the start of Russia’s military offensive in Ukraine.
However, sluggish economic growth in China and the strong possibility of a recession in several economies weighed on the market and brought prices back down in 2022.
The kingdom needs to maintain its high growth rate, Ms Georgieva told the World Economic Forum in Davos.
“We look at the high growth rates of Saudi Arabia with gratitude … also because we need that for the regional and the world economy,” she said at the time.
The kingdom has raised its fiscal surplus estimates for this year, which reflects its confidence in its economic reform programme that has been strengthened by higher oil prices.
Saudi Arabia approved a 1.11 trillion-riyal budget for 2023 last week and forecast a surplus of 16 billion riyals, or 0.4 per cent of its GDP.
This compares with a previous surplus estimate of 9 billion riyals announced in a pre-budget statement three months ago.