Saudi GDP eases 2.8% in Q1 amid Iran conflict
Saudi Arabia’s real gross domestic product increased 2.8% year-on-year in the first quarter, according to flash government estimates issued on Thursday.
Non-oil activities rose 2.8% while oil-related activities grew 2.3% year-on-year, data by the General Authority for Statistics (GASTAT) suggested.
However, seasonally adjusted real GDP for the first quarter decreased 1.5% on the previous quarter, driven by a 7.2% decline in oil activities, as the implications of the Iran-US war come into play. Government and non-oil activities grew 0.8% and 0.2% respectively.
“Oil activities were the main contributor to the decline in seasonally adjusted real GDP, -1.7 (percentage points). Non-oil activities and government activities each contributed 0.1 (percentage points),” the report added.
Gulf oil exporters directly affected by the war face steep downward revisions of up to 15 percentage points this year. The International Monetary Fund has lowered its GDP growth prediction for the kingdom for this year and next.
The Saudi economy is now expected to expand 3.1 percent this year, down 0.9 percent from the IMF’s last review in October, and 4.5 percent in 2027, up 1.3% from its October’s forecast.
On balance, Saudi Arabia is assessed to be less sensitive to price increase versus decline in volumes compared to other GCC economies such as Kuwait, the fund said in its latest review. Hence, a 10% increase in oil prices or a 10% decline in export volumes will impact the current account by slightly more than 1 percentage point.
Saudi Arabia activated its East-West Crude Pipeline at full capacity for the first time in its 40-year history in the wake of the US-Iran conflict. The petroline - that runs 1,201 kilometres connecting the Abqaiq oil field in the eastern province to Yanbu on the Red Sea coast, was built during the Iran-Iraq war in the 1980s.
Saudi Aramco confirmed last March that it had increased the pipeline’s capacity to seven million barrels a day. Exactly a year later, the petroline reached its full operational capacity.
