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The World Bank maintained its forecast on the Kingdom’s economic growth at 2.5% this year, according to its Global Economic Prospects report (pdf). The unchanged outlook comes after the multilateral lender slashed its growth expectations in April, saying it expects GDP to grow at a 2.5% clip in 2024, down from the 4.1% it had penciled in back in January.
Picking up steam: The World Bank also kept its forecast for 2025 unchanged, saying it sees the economy growing 5.9% next year. This remains an upward revision from its January 4.2% forecast. The Finance Ministry is targeting GDP growth of 4.4% in its budget for this fiscal year, Finance Minister Mohamed Al Jadaan said in December 2023.
The drop in oil production “constrained” oil activity across Saudi and other GCC nations, the World Bank said, leading the Saudi economy to contract in 1Q 2024. State statistics agency Gastat data out earlier this week showed GDP contracting during the first quarter of the year, falling 1.7% y-o-y to SAR 1 bn. This is a slightly smaller figure than the 1.8% y-o-y drop that the authority had initially forecast on the back of a decline in oil activity.
Non-oil activity will continue to lead the charge as oil output takes a step back, according to the World Bank. “This growth is attributed to robust non-oil activity, driven by strong private consumption and investment, supported by fiscal and monetary policies. In 2025, a gradual resumption of oil activity is expected to raise growth,” the World Bank said.
REMEMBER- Non-oil growth is central to the government’s diversification push, designed to reduce the economy’s reliance on oil revenues.
BUT, BUT, BUT… Fiscal surpluses are expected to continue shrinking in Saudi and other nations on the back of a drop in oil revenues and higher expenditures on mega projects, the World Bank said. The government recorded a budget deficit of SAR 81 bn — 2% of GDP — in FY 2023, compared to a SAR 16 bn surplus in its approved budget for the year. This is in line with an openness by policymakers to accept small deficits as the price of continuing to invest in growth.
