Saudi Arabia’s economic growth eased to an annual 3.8% in the second quarter of 2014, the lowest rate in a year, because of a slowdown in the oil sector, official data showed yesterday.
But the first-quarter growth rate for inflation-adjusted gross domestic product was revised up to 5.1% – the fastest pace since the third quarter of 2012 – from an initial reading of 4.7%.
On a quarter-on-quarter basis, GDP dropped 3.1% in the second quarter, the biggest fall since the quarterly data series began in 2010, after a 4.1% jump in the previous quarter, the figures from the Central Statistics Office showed.
Saudi Arabian economic growth is usually at its most robust early in the year, when the weather is favourable and few public holidays halt work; GDP then regularly falls in the second quarter from the previous three months.
Growth in the hydrocarbons sector, which accounts for almost half of the $748bn Saudi economy, slumped to 2.5% year-on-year in the second quarter from 6.1% in the previous three months, the data showed.
The Opec member exported just below 7mn barrels of oil per day in May-July, the lowest amount since September 2011, according to the Joint Organisations Data Initiative (JODI), because of weak global demand. The kingdom burns more oil domestically in the summer to satisfy growing demand for cooling, which has been eating into exports.
Saudi oil production may ease in the second half of this year since crude oil prices have decreased to around $96 per barrel and as the region exits the summer period of peak demand.
“We think that the second half will see a lower (GDP) growth than 4.5%…because of the lower contribution of the oil sector,” said Fahad Alturki, head of research at Jadwa Investment in Riyadh.
Growth of the non-oil private sector edged up to an annual 4.7% in April-June from an upwardly revised 4.6% in the previous three months, a sign that the impact of labour market reforms might be starting to subside.
“Momentum in the private sector continues, indicating that despite a decline in oil production, the non-oil private sector as well as state spending could help the kingdom easily achieve the economic growth target of 4% in 2014,” said Abdulwahab Abu Dahesh, a Saudi economist.
Around a million foreign workers left Saudi Arabia last year after a crackdown on visa irregularities as a part of labour reforms aimed at putting more Saudi nationals into jobs. This dampened consumption and production in some sectors.
“The situation is definitely improving. And because of the year-on-year growth, we will see less of that impact in the third quarter and fourth quarter,” Alturki said.
A Reuters poll of analysts in April forecast Saudi economic growth would ease to 3.8% in 2014 from 4.0% last year and then accelerate to 4.3% in 2015.