Saudi Arabia 2023 GDP growth slows to 2.1% on oil output cuts – IMF
SINGAPORE (ICIS)–Saudi Arabia, the world’s biggest crude exporter, is expected to post a slower GDP growth of 2.1% this year in view of production cuts announced in April, according to the International Monetary Fund (IMF).
The country’s additional voluntary oil production cut of 1m bbl/day in July with a possible extension, could further weigh on its economic outlook.
In April, it announced a voluntary output cut of 500,000 bbl/day announced.
IMF’s revised forecast was a full percentage point lower than the previous projection of 3.1% and represents a sharp deceleration from the 8.7% growth posted in 2022, the global financial stability watchdog said in a statement following a periodic review of the Saudi economy.
Saudi Arabia posted the fastest GDP growth among the Group of 20 (G20) biggest economies last year, according to the IMF.
“On the upside, higher oil prices—as expectations of strong oil demand for the rest of the year persist—possible change in OPEC+ oil production cuts and accelerated structural reforms and investment could spur growth,” the IMF said.
The Saudi Arabia-led oil cartel OPEC and its allies (OPEC+), including Russia, had in place oil output cuts of 3.66m bbl/day, comprising a 2m bbl/day cut agreed last year from August 2022 production levels, and a further 1.66m bbl/day of voluntary cuts from nine OPEC+ countries.
“On the downside, lower oil prices due to subdued global activity represent a key short-term risk while a quicker shift in demand for fossil fuel could hamper growth in the medium to long term,” the IMF said.
Saudi Arabia’s output cut pledge was largely seen as an effort to support weakening oil prices.
At 07:02 GMT, oil prices were steady with upside from Saudi Arabia’s output cut being offset by demand concerns amid a global economic slowdown.
While the production cuts would reduce overall economic growth in Saudi Arabia, non-oil growth is expected to average 5% this year “and remain above potential as strong consumption spending and accelerated project implementation boost demand”, it said.
“Overall growth reached 8.7% [in 2022], reflecting both strong oil production and a 4.8% non-oil GDP growth driven by robust private consumption and non-oil private investment, including giga projects.” it said.
“Wholesale, retail trade, construction, and transport were the main drivers of non-oil growth,” the IMF said.
Despite robust economic activity, inflation remains low and appears to be easing, it said.
Saudi Arabia’s average consumer price index rose by 2.5% year on year in 2022, in part contained by domestic subsidies and a strong US dollar.
Focus article by Nurluqman Suratman
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