ECONOMIC TRENDS

SAUDI GDP UP NEARLY 12% IN Q2 ON BACK OF OIL AND NON-OIL GROWTH

Saudi Arabia’s real gross domestic product (GDP) grew at an impressive 11.8% in the second quarter of 2022 compared to the same period last year. This dynamic growth was mainly due to oil activities increasing by 23.1%, according to a flash estimate from the General Authority for Statistics (GASTAT). Non-oil activities surged 5.4% in Q2/2022, and government services activities expanded 2.2%, year on year.

“Seasonally adjusted real GDP increased by 1.8% in Q2/2022 compared to the previous quarter (Q1/2022),” the agency said. “This increase is due to the positive growth in oil activities by 4.8% and the government services activities by 0.2% while the non-oil activities decreased by 0.4%.” 

While oil exports remain a formidable component of Saudi Arabia’s trade flows, non-oil sector exports are also ramping up.

Latest available data shows the value of merchandise exports in Saudi Arabia in May 2022 reached SAR 144 billion, compared to SAR 79 billion in May 2021, an 83.4% increase, according to a separate report by GASTAT).

While oil exports soared 105.5% to SAR 116 billion, the value of non-oil exports including re-exports in May reached SAR 28 billion, a 26.7% jump compared to the same period last year.

The news comes as the kingdom posted a SAR 77.9 billion (USD 20.8 billion) budget surplus in the second quarter of 2022, thanks to rising oil revenues

Total revenues reached SAR 370.4 billion, or a 49% year-on-year increase, according to the Ministry of Finance. Expenditures were at SAR 292.5 billion, up 16% from last year.

Oil revenue primarily led the surplus, surging 89% to SAR 250.36 billion in the second quarter, from SAR 132.1 billion in the same period last year. Non-oil revenue during the period was also up 3% to SAR 120 billion.

  

Business sentiment is also on the rise

The kingdom’s non-oil private sector reported rising customer numbers, increased output, and greater purchasing. The sustained upturn supported a faster increase in employment, with the rate of job creation accelerating to the strongest level in nearly three years, according to S&P Global’s monthly survey of purchasing managers.

“Inflationary pressures remained marked, however, with both input costs and output charges recording solid rises. The headline seasonally adjusted S&P Global Saudi Arabia Purchasing Managers’ Index posted at 56.3 in July, signalling an improvement in business conditions for the twenty-third month in a row,” S&P said.

Five times as many firms saw an increase in activity on the month compared to those that saw a decline (25% versus 5%), with the expansion mainly linked to higher sales, new projects, and greater marketing.

“New business continued to rise substantially, helped by recovering demand and strengthening export sales,” said David Owens, economist at S&P Global Market Intelligence. “As a result, output expanded sharply and employment numbers rose at the fastest pace since September 2019, following a period of weakness in labour markets since the COVID-19 pandemic began.”

Businesses attributed the increase in sales to improved domestic market conditions, and higher export demand, as new foreign orders surged sharply, and to the greatest extent since last November.

Encouragingly, new orders also led to an increase in employment levels in July, an uptick for the fourth consecutive month. “Furthermore, the pace of job creation was the quickest since September 2019,” S&P said.

 

MOODY’S DEBT REPORT

Moody’s Investors Services’ latest credit report on Saudi Arabia also underscores strengths in the country’s economy, institutions, and governance structures.

The ratings firm expects the economy to grow at 3.9% from 2022 to 2026 on average, and affirmed its “A1" rating for the kingdom with a stable outlook on the back of the government's commitment to fiscal consolidation, and continuous structural measures and reforms toward long-term fiscal sustainability.

“Elaborating on the factors of its medium-term growth projections, Moody's mentioned the continuity of the government's commitment to further fiscal consolidation despite elevated oil prices, the slow growth of oil production, the continuation of diversification projects with the critical mass moving into the implementation/construction phase in the next several years,and the structural economic, legal, and social reforms that the government has been implementing to improve the business environment in Saudi Arabia that will begin to bear fruit in the form of higher private sector investment growth,” according to a Ministry of Finance assessment.