Saudi Arabia's economy expanded by 3.9 per cent in the first quarter on an annual basis, boosted by growth in its non-oil sector as the kingdom continues efforts to diversify its economy from hydrocarbons.
Non-oil activities grew 5.8 per cent in the first three months of the year compared with the same quarter in 2022, while oil activities rose 1.3 per cent during the period, initial estimates released by the General Authority for Statistics on Sunday showed.
Meanwhile, government services activities increased 4.9 per cent year-on-year during the first quarter, the government agency said.
The economies of oil-exporting countries in the Middle East and North Africa region are expected to remain resilient, supported by robust momentum of their non-oil economic growth, even if hydrocarbon revenue declines, the International Monetary Fund said earlier this month.
Saudi Arabia benefitted from a surge in oil prices last year up to as much as a notch under $140 per barrel after Russia's invasion of Ukraine.
The Arab world's largest economy expanded 8.7 per cent last year, the highest annual growth rate among the world's 20 biggest economies, driven by higher oil prices and the strong performance of its non-oil private sector.
The hydrocarbon revenue windfall in 2022 helped the oil exporter to build fiscal buffers and invest in driving its non-oil economic growth.
Saudi Arabia's economic growth of 3.9 per cent in the first quarter slowed from the 5.5 per cent annual expansion in the fourth quarter of 2022, Gastat data showed.
This decrease was primarily due to a decline in oil activities in the first quarter, which rose 6.1 per cent in the fourth quarter, compared with the 1.3 per cent increase in the January-March period.
This year, the IMF expects a drop in the growth of the GCC region’s oil gross domestic product due to “several cuts” in oil production and “various adjustment in the Opec+ agreement”, Jihad Azour, director of the IMF's Middle East and Central Asia Department, said last week.
Opec+ producers have announced voluntary output cuts totalling 1.16 million barrels per day to ensure oil market stability. Saudi Arabia, the world’s biggest oil exporter and Opec's largest producer, will cut its output by 500,000 bpd from May until the end of the year.
“It's important, especially for the GCC, to differentiate between their oil and the non-oil sectors,” Mr Azour said.
“The good news is that growth in the non-oil sector is somehow resilient — around 4 per cent to 4.5 per cent on average this year and next.
“This reflects the efforts that were made to diversify economies and also the fact that governments have increased their capacity to raise revenues outside of oil.”
It is important for Mena oil exporters to remain on the path of non-oil economic growth and being “less dependent” on oil revenue to accelerate the diversification of their economies, which, in turn, will allow governments to generate additional income, he said.
The kingdom is in the midst of a major economic diversification drive under its Vision 2030 agenda, amid a push to reduce its reliance on oil and tap into other high-growth industries to boost its economy, create more jobs and attract private investment.
Saudi Arabia is investing heavily in its non-oil sector including developing tourism, hospitality, aviation, logistics, advanced manufacturing and technology industries.
Saudi Arabia plans to add 315,000 new hotel rooms with an estimated development cost of $37.8 billion by 2030, taking the total stock to nearly 450,000 hotel rooms, with giga-projects such as the futuristic city of Neom leading the supply pipeline, according to Knight Frank's 2023 Saudi Report issued last week.