Saudi Arabia's fiscal policies will help accelerate growth in the non-oil sector this year as the world's biggest oil exporter posts its fastest growth rate in three years in the fourth quarter of 2018.
Growth in the final quarter of 2018 rose to 3.59 per cent, compared with a 1.31 per cent contraction in 2017, according to the latest official data. Annual growth in the third quarter was 2.5 per cent. The oil sector expanded 6 per cent in the fourth quarter of 2018, compared with a 4.7 per cent contraction in the same period of 2017.
The non-oil sector grew 2 per cent in the last quarter of 2018, nearly flat from 2.02 per cent in the year-earlier period.
“We continue to believe that the government’s expansionary fiscal policy for this year will provide an impetus to the non-oil sector in the coming quarters,” Al Rajhi Capital said in a note on Tuesday.
Saudi Arabia, the biggest Arab economy, is implementing a series of reforms to diversify its income away from oil under the umbrella of Vision 2030. These measures include initiatives to attract foreign direct investment, supporting private sector jobs and approving a 200 billion riyal (Dh195.86bn) stimulus programme.
Saudi Arabia approved a record budget for 2019 to help spur growth, which languished in previous years because of fiscal consolidation measures and oil production cuts to comply with Opec curbs.
As a member of Opec, Saudi Arabia has been trimming production since January, and is expected to continue to do so under the six-month agreement with Opec+ – an alliance between the group and non-member countries led by Russia.