Saudi Arabia's Economy Contracts 1.8% in Q1 2024 Amid Oil Slump

Saudi Arabia's economy contracted by 1.8% year-over-year in the first quarter of 2024, according to preliminary data from the General Authority for Statistics. The decline was driven by a 10.6% plunge in oil activities, despite a 2.8% growth in the non-oil sector.

The kingdom's GDP had shrunk by 3.7% in the last quarter of 2023 due to oil production cuts and lower crude prices. Saudi Arabia is currently pumping around 9 million barrels per day, well below its 12 million bpd capacity, as part of an agreement with OPEC and other producers "to address the difficulties" facing the oil market.

On a quarterly basis, seasonally adjusted growth was up 1.3% from the previous quarter, with a 2.4% increase in oil activities and a 0.5% growth in non-oil activities, although government activities decreased by 1%. The non-oil economy, a priority for the government, expanded by 2.8% in Q1 2024, with a 2% growth rate in government activities.

Why this matters: Saudi Arabia's economic contraction highlights the difficulties faced by oil-dependent economies amid volatile crude prices and production cuts. The kingdom's efforts to diversify its economy away from oil, as part of its Vision 2030 plan, are crucial for long-term stability and growth.

Saudi Arabia needs oil at $96.2 to balance its 2024 budget, but Brent crude has averaged around $83.50 so far this year. The kingdom is projected to grow 2.6% in 2024, a downward revision from the previous 4% forecast, due to continued output cuts. Finance Minister Mohammed al-Jadaan stated that the country will "modify, prolong, reduce, and speed up some of the projects to address the difficulties" posed by the budget deficit.

Key Takeaways

• Saudi Arabia's GDP contracted by 1.8% in Q1 2024 due to 10.6% plunge in oil activities.
• Saudi GDP shrank 3.7% in Q4 2023 due to oil production cuts and lower crude prices.
• Non-oil sector grew 2.8% in Q1 2024, but government activities decreased by 1%.
• Saudi Arabia needs $96.2 oil to balance 2024 budget, but Brent crude averaged $83.50 this year.
• Saudi to modify projects to address budget deficit caused by continued output cuts.