Oil Cuts and Price Drops Bite: Saudi Arabia’s Economic Growth Slows

Saudi Arabia’s economic growth slowed in the second quarter due to cuts in crude output and a decline in oil prices. Despite being one of the fastest growing nations in the G20, Riyadh’s GDP only expanded by 1.1% in the second quarter, compared to 3.8% in the previous quarter and 11.2% in the same period last year.

Under Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification program, Saudi Arabia has been focusing on the non-oil sector. This sector experienced a growth of 5.5% in the second quarter. However, Riyadh faced a 4.2% decline in non-oil GDP during the same period, primarily due to lower global crude prices and voluntary oil production cuts.

While Saudi Arabia benefited from the spike in oil prices last year, the situation has changed. Oil prices have remained below $80 per barrel due to concerns about the global economy, decreased demand, and China’s slow recovery from Covid-19 restrictions. Additionally, Saudi Arabia has taken on the majority of voluntary crude production cuts agreed upon by OPEC+ members.

The International Monetary Fund (IMF) previously recognized Riyadh as the fastest growing G20 economy in 2022, with an overall expansion of 8.7%. However, the IMF has now revised its GDP growth projections for Saudi Arabia, expecting a slowdown to 1.9% in 2023. This downgrade is attributed to the production cuts announced by OPEC+ and highlights the importance of private investment in supporting non-oil GDP growth.

This slowdown in Saudi Arabia’s economy is expected to have an impact on the overall performance of the Middle East and Central Asian region, with the IMF projecting growth of just 2.5% for this year, compared to 5.4% in 2022.