Saudi Arabia's GDP Declines 1.8% in Q1 2024 Amid Oil Production Cuts

Saudi Arabia's real gross domestic product (GDP) decreased 1.8% year-on-year in the first quarter of 2024, according to flash estimates by the government's statistical authority. This follows a 3.7% contraction in the fourth quarter of 2023, as cuts to oil production and lower crude prices impacted the economy.

The oil sector, which is the backbone of Saudi Arabia's economy, was down 10.6% in the first quarter compared to the previous year. The kingdom continues to reduce oil production as part of an agreement with OPEC and other producers. However, non-oil GDP grew 2.8% year-on-year, and government activities increased 2%.

On a quarterly basis, seasonally adjusted growth was up 1.3% from the previous quarter, driven by a 2.4% increase in oil activities and a 0.5% growth in non-oil activities, although government activities decreased by 1%.

Why this matters: Saudi Arabia's economic performance has significant implications for global oil markets and the broader Middle East region. As the world's largest oil exporter, the kingdom's production decisions can impact oil prices and the economies of other oil-producing nations.

The kingdom's economy contracted 0.9% in 2023, pulled lower by the oil sector, while non-oil activities grew by 4.6% last year. This marks a sharp contrast to 2022, when Saudi Arabia was the G20 group's best performing economy, with a growth of 8.7% and its first fiscal surplus in almost a decade, boosted by an oil price windfall.

Key Takeaways

• Saudi Arabia's Q1 2024 GDP contracted 1.8% YoY, following 3.7% Q4 2023 decline.
• Oil sector down 10.6% YoY, but non-oil GDP grew 2.8% and govt activities 2%.
• Q/Q growth up 1.3%, driven by 2.4% increase in oil and 0.5% in non-oil.
• Saudi economy contracted 0.9% in 2023, with non-oil activities growing 4.6%.
• Saudi economic performance impacts global oil markets and Middle East region.