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The domestic economy is expected to grow 1.3% in 2024, marking the lowest rate of growth among GCC peers due to extended oil production cuts, according to the latest Reuters poll of 24 economists. The economists’ most recent forecasts are a downward revision from the 1.9% they had expected in April and the 3.0% they had projected in January.
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This matches up with the IMF’s recent forecasts: The International Monetary Fund (IMF) cut its forecast last week for Saudi economic growth to 1.7% this year, down 0.9 percentage points from its earlier forecast of 2.6% in April on the back of ongoing oil output cuts. This was the fund’s largest single downgrade on growth outlook for the major economies the IMF tracks. The Finance Ministry is targeting GDP growth of 4.4% for the current fiscal year, Finance Minister Mohamed Al Jadaan said in December.
IN CONTEXT- The Kingdom voluntarily cut oil production by 1 mn barrels per day to stabilize the global market as per its ongoing agreement with OPEC+ to slash oil production by a combined 3.7 mn barrels per day until October of this year.
What the pundits are saying: “Lower oil revenues are impacting non-oil growth. Saudi Arabia is in the process of an overhaul of Vision 2030 and adjusting investment spending … The impact on real GDP growth is clear — less investment means a more moderate growth outlook,” Ralf Wiegert, director of MENA economics at S&P Global Market Intelligence, told the newswire. Lower oil revenues for Saudi will likely lead to less investment in non-oil sectors (central to the government’s diversification push), impacting overall expansion in 2024, economists said.
Things are looking more positive next year: The poll showed economists raising their forecasts for Saudi’s economic growth in 2025 to 4.5%, up from their 4.1% forecast in April. “The reason for that is a change in expected oil production, which we think will be increased earlier than previously projected — though not back to the level that prevailed until July 2023,” Wiegert said. The IMF sees the economy growing at 4.7% clip in 2025 — 1.3 percentage points below its April forecast.
How our peers will be faring: The UAE is expected to lead the GCC in economic growth with a 3.7% growth clip this year that will accelerate to 4.2% in 2025 due to an expected headstart in raising oil production and a focus on tourism. Qatar is projected to grow 2.2%, Oman will hit 1.6% growth, and Bahrain is penciled in for 2.6% expansion, while Kuwait is expected to remain in a recession this year.
