Saudi economy is predicted to grow another 2.5 per cent this year

Saudi economy is predicted to grow another 2.5 per cent this year

Saudi economy ‘to grow 2.5pc’

Ongoing reform efforts by the Saudi Arabian government to facilitate economic diversification should contribute to the recovery, says a UN Conference on Trade and Development (UNCTAD) report

February 2020

The UN Conference on Trade and Development (UNCTAD) has projected economic growth for Saudi Arabia in 2020.

The UAE, Kuwait, Qatar, Bahrain and Oman are also predicted to experience modest economic growth, according to UNCTAD’s “World Economic Situation Prospects 2020” report.

While Gulf Cooperation Council (GCC) nations experienced a “substantial slowdown” in growth in 2019, the report said: “Ongoing reform efforts by the (Saudi and UAE) governments to facilitate economic diversification should also contribute to the recovery.”

Saudi economic analyst Ahmed Al-Duaij said that the Kingdom’s economy improved after the reforms. “The Saudi economy, between the end of 2019 and the beginning of 2020, has concluded some massive projects under Saudi Vision 2030,” he told Arab News.

He added: “All these factors help the Saudi economic wheel turn faster. I predict the Saudi economy will grow another 2.5 per cent this year. This will be a catalyst for many sectors, and help revive the real estate sector, and when that happens, it will influence the construction, building and cement sectors.”

Riyadh will host the next Middle East summit of the World Economic Forum. “This grand meeting will attract many investors, and this shows the strength and durability of the Saudi economy,” Al-Duaij said.

Al-Duaij added that there has been a rise in the participation of the private sector through a system of public-private partnership contracts, which are based on the participation of the government apparatus and the finance sector.

“This accelerates the Saudi economy because the private sector used to be a spoiled child that would not benefit you and only take away from you. Now, it is forced to enter and participate in the economy, and the non-oil dependent economy in the Kingdom is growing.”

Saudi Arabia’s non-oil sector GDP reported a year-on-year (y-o-y) growth of 4.3 per cent in the third quarter (Q3) of 2019 as a growth of 2.9 per cent in the second quarter (Q2) of the year, a report said.

The growth was aided by ‘Government services’, ‘Finance, Insurance, Real estate and Business services’, ‘Wholesale & Retail Trade, Restaurants & Hotels’ and ‘Transport, Storage & Communication’ segments, added the latest Saudi Economy Report issued by Al Rajhi Capital, a leading provider of financial services in the kingdom.

However, oil sector GDP slipped 6.4 per cent y-o-y largely attributed to production cuts. Meanwhile, private sector credit growth witnessed a growth of 5.3 per cent y-o-y in November 2019, highest level since past three years. This might be attributed to the lower borrowing cost amid declining interest rates, the report said.

The POS transactions posted a robust growth of 30.1 per cent y-o-y in November 2019 primarily driven by ‘Restaurants & Hotels’ segment. Higher digital spending indicates that consumer spending is increasing and should contribute to the overall growth. Index of industrial production surged 7.5 per cent month-on-month (m-o-m) in October, backed by the ‘Mining and Quarrying’ sector.

The Saudi unemployment rate, among locals, fell to 12 per cent in Q3 2019 (12.3 per cent in Q2 2019), recording the lowest rate since Q4 2016. The decline was majorly due to increase in male participation rate, which grew to 67 per cent from 66 per cent in the previous quarter.

Further, total unemployment rate, including expats, dropped to 5.5 per cent in Q3 2019 (5.6 per cent in Q2 2019). We believe that government’s continued commitment towards supporting SMEs will further improve job opportunities in the Kingdom.

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