The International Monetary Fund (IMF) has downgraded its growth forecast for the Saudi economy due to ongoing oil production cuts by OPEC+. The IMF now sees 2024 growth clocking in at just 1.7%, nearly a percentage point lower than its earlier projection of 2.6%. The effects of the cuts are expected to spill over into the coming year, with the IMF projecting GDP growth of 4.7% in 2025, a downward revision of 1.3 percentage points from April.
Thankfully, Saudi Arabia is increasingly becoming less reliant on oil to power its economy. Earlier in the year, the country’s Ministry of Economy and Planning revealed that non-oil revenues hit 50% of the Kingdom’s gross domestic product (GDP) in 2023, the highest level ever.
The country’s non-oil economy was valued at 1.7 trillion Saudi Riyals (approximately 453 billion U.S. dollars) at constant prices, driven by steady growth in exports, investment and consumer spending. Last year, the Kingdom’s private-sector investments expanded by a brisk 57 percent, reaching a record high of 959 billion Saudi Riyals (254 billion dollars), while arts & entertainment and real service exports grew in triple-digits to the tune of 106 percent and 319 percent, respectively, reflecting the Kingdom’s transformation into a global destination for tourism and entertainment. Meanwhile, the food sector recorded 77 percent growth; transport and storage services grew 29 percent, health and education recorded growth of 10.8 percent; trade, restaurants and hotels at 7 percent, while transport and communications increased 3.7 percent.
Back in April, the IMF predicted that Middle East economies would grow at a slower pace than earlier projections due to the war in Gaza, attacks on Red Sea shipping and lower oil output add to existing challenges of high debt and borrowing costs. The IMF now expects the Middle East and North Africa (MENA) economy to expand by 2.7 percent from 3.4 percent in its October regional outlook. However, that would mark 1.9 percent growth from 2023.
By Alex Kimani for Oilprice.com
Lead image (Credit: Reuters)
