Saudi Arabia: Outright recession in 2017

5 min

Recently released data by the General Authority for Statistics (GAS) show that real GDP contracted by -0.4% y/y in Q3 2017, following -1% y/y in Q2 2017 and -0.5% y/y in Q1. Demand-side details as well as data for Q4 are not available as yet. However, the GAS also provided first estimates for full-year GDP, indicating that the economy declined by -0.7% in 2017 as a whole. Supply-side estimates show that the oil sector shrank by -3% in 2017 while the non-oil sector grew by +1%. Within the oil sector, oil extraction dropped by -3.5%, impacted by the November 2016 OPEC agreement to cut oil output, while oil refining increased by +2.4%. Within the non-oil sector, construction (-3.4%) contracted sharply in 2017 while financial and business services (+2.2%), transport and communication (+1.9%), utilities (+1.3%), domestic trade (+0.6%) and agriculture (+0.4%) increased. For 2018, the government has announced a record budget to help pull the economy out of recession. Combined with higher average oil prices and base effects, this should result in GDP growth of +1.7% in 2018, Euler Hermes forecasts.