Saudi Arabia’s economy experienced a contraction of 0.46 percent in the third quarter of 2019 year-on-year chiefly due to reduced oil revenue as a result of the self-enforced OPEC+ production cut deal, government data revealed Tuesday.
Oil sector output declined 6.43 percent, data from Saudi Arabia’s General Authority of Statistics said. The Organization of Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de facto leader, and allies, collectively called OPEC+, have been committed to deep production cuts in order to support global energy markets. Saudi Arabia is bearing the brunt of these cuts.
Meanwhile, the country’s non-oil sector grew 4.33 percent. This figure coincides with rising positive sentiment in the non-oil private sector community, with the country’s seasonally adjusted Purchasing Managers’ Index (PMI) – used to gauge operating conditions in the non-oil economy – rising to 58.3 last month, the highest figures recorded since August 2015.
Mining and quarrying saw the biggest contracting in the quarter, a decline of 6.39 perecent. Meanwhile petroleum and refining also dropped 6.11 percent.
Whole and retail trade experienced growth of 8 percent, with finance, insurance, business services and real estate growing by a smaller 6.28 percent.
Saudi Arabian authorities expect economic growth to pick up in 2020 to 2.3 percent, up from 2019 projections of 0.4 percent.
The figures come after the Kingdom released a reduced 2020 budget of $272 billion, down from $280 billion in 2019.
After the announcement of the budget, Saudi Arabia’s Crown Prince Mohammed bin Salman said the stage of economic transformation adopted by the Kingdom’s government “is progressing at a steady pace according to the Kingdom’s Vision 2030.”
“I think the savings projected [in the budget] are realistic, and the increased oversight of procurement is positive,” said James Reeve, Group Chief Economist of Riyadh-based Samba Financial Group.
Since Saudi Arabia’s Crown Prince Mohammed bin Salman introduced the ambitious reform plan known as Vision 2030 in 2016, the Kingdom has made strides towards diversifying its economy and reducing its dependence on oil revenues.
Saudi Arabia jumped 30 spots in the World Bank’s Ease of Doing Business 2020 index in October – the biggest improvement and highest jump worldwide. Reforms under Vision 2030 have led to improved access to credit, strengthened minority investor protections, and facilitated the resolution of insolvency in the Kingdom, according to the World Bank.