Saudi Arabia’s GDP contracts 3.3% in Q1 on oil output, non-oil economy recovers

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Saudi Arabia’s economy shrank 3.3% in the first quarter from a year earlier, hit by oil output cuts, but the non-oil economy expanded 3.3%, recovering from the pandemic, according to flash government estimates on Monday.

The non-oil sector grew for the first time since the first quarter of 2020, the General Authority for Statistics in Saudi Arabia said in a statement. Government services also showed growth of 0.3% in the first quarter.

Saudi Arabia’s economy, the largest in the Arab world, is expected to grow 2.1% in 2021 after shrinking 4.1% last year amid the twin shocks of the coronavirus pandemic and lower oil prices, the IMF said in a recent report.

The latest data showed overall GDP in the first quarter was hurt by a 12% decline in ongoing crude oil production cuts agreed by the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, a group known as OPEC+ since May 2020.

Seasonally-adjusted quarter-on-quarter the economy shrank by only 0.1%, while the non-oil economy expanded 4%, the data showed. Government services grew by 0.5%.

Saudi Arabia is trying to boost the non-oil sector through a multi-trillion dollar spending push that will require state companies to cut the dividends they pay the government to boost capital spending, Crown Prince Mohammed bin Salman has said.

Prince Mohammed, the architect of Saudi Vision 2030 that aims to wean the economy off oil, has also said the state-backed Public Investment Fund (PIF) will pump at least 150 billion riyals ($40 billion) into the local economy each year through 2025.