Saudi Arabia’s economy grew at a pace of 2.21 per cent in 2018, buoyed by strong oil sector growth, government data showed on Thursday, recovering from a contraction in 2017 when the economy was hurt by weak oil prices and austerity measures.
In 2017, it shrank 0.74 per cent for the first time since the global financial crisis nearly a decade earlier.
Oil sector grew 2.85 per cent from a contraction in 2017, while non-oil sector grew 2.05 per cent, the data showed. For a table on the 2018 numbers click (bit.ly/2UsfaPd)
Saudi officials have predicted a gradual acceleration in non-oil economy in 2019 as government decided to boost spending.
Last month Riyadh released a state budget for 2019 that would increase spending by 7 per cent from this year’s actual level. Investment spending and bonuses for state employees in the budget could revive the private sector.
“Headline real GDP growth is forecast to moderate in 2019 with the OPEC-led oil production cuts, and at this point we only expect a modest increase in non-oil growth,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
The Organization of the Petroleum Exporting Countries (OPEC) and its Russia-led allies agreed last month to slash oil production by more than the market had expected, according to Reuters news agency.
Malik said a key issue for the economy in 2019 will be the degree of progress that will be made on the investment program of the sovereign wealth, the Public Investment.
The PIF is backing some of the biggest projects in Saudi Arabia such as the $500 billion NEOM mega economic zone, which the government has said will start developing its first area in the first quarter of 2019.
The 26,500 square km (10,230 square mile) high-tech hub, first revealed in 2017, will include high-tech projects powered by wind and solar energy and sports halls, concert facilities and restaurants.