Saudi economic growth drops to 3.8% in Q2

Updated 25 September 2014
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Saudi economic growth drops to 3.8% in Q2

DUBAI: Saudi Arabia's economic growth eased to an annual 3.8 percent in the second quarter of 2014, the lowest rate in a year, because of a slowdown in the oil sector, official data showed on Wednesday.
But the first-quarter growth rate for inflation-adjusted gross domestic product was revised up to 5.1 percent - the fastest pace since the third quarter of 2012 - from an initial reading of 4.7 percent.
On a quarter-on-quarter basis, GDP dropped 3.1 percent in the second quarter, the biggest fall since the quarterly data series began in 2010, after a 4.1 percent jump in the previous quarter, the figures from the Central Statistics Office showed.
Saudi Arabian economic growth is usually at its most robust early in the year, when the weather is favorable and few public holidays halt work; GDP then regularly falls in the second quarter from the previous three months.
Growth in the hydrocarbons sector, which accounts for almost half of the $748 billion Saudi economy, slumped to 2.5 percent year-on-year in the second quarter from 6.1 percent in the previous three months, the data showed.
The Kingdom exported just below 7 million barrels of oil per day in May-July, the lowest amount since September 2011, according to the Joint Organisations Data Initiative (JODI), because of weak global demand. The Kingdom burns more oil domestically in the summer to satisfy growing demand for cooling, which has been eating into exports.
Saudi oil production may ease in the second half of this year since crude oil prices have decreased to around $96 per barrel and as the region exits the summer period of peak demand.
"We think that the second half will see a lower (GDP) growth than 4.5 percent...because of the lower contribution of the oil sector," said Fahad Alturki, head of research at Jadwa Investment in Riyadh.
Growth of the non-oil private sector edged up to an annual 4.7 percent in April-June from an upwardly revised 4.6 percent in the previous three months, a sign that the impact of labor market reforms might be starting to subside.
"Momentum in the private sector continues, indicating that despite a decline in oil production, the non-oil private sector as well as state spending could help the Kingdom easily achieve the economic growth target of 4 percent in 2014," said Abdulwahab Abu Dahesh, a Saudi economist.
Around a million foreign workers left Saudi Arabia last year after a crackdown on visa irregularities as a part of labor reforms aimed at putting more Saudi nationals into jobs. This dampened consumption and production in some sectors.
"The situation is definitely improving. And because of the year-on-year growth, we will see less of that impact in the third quarter and fourth quarter," Alturki said.
A Reuters poll of analysts in April forecast Saudi economic growth would ease to 3.8 percent in 2014 from 4.0 percent last year and then accelerate to 4.3 percent in 2015.


Oil prices climb on improving US demand signs, OPEC agrees to meeting date

Updated 4 min 34 sec ago
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Oil prices climb on improving US demand signs, OPEC agrees to meeting date

  • After swelling to near two-year highs, US crude stocks fell by 3.1 million barrels last week
  • Members of the OPEC agreed to meet on July 1
TOKYO: Oil prices rose nearly 2 percent on Thursday on signs of improving demand in the United States, the world’s biggest crude consumer, and as OPEC and other producers finally agreed to a date for a meeting to discuss output cuts.
Brent crude futures rose $1.13, or 1.8 percent, to $62.95 a barrel at 0611 GMT. They dropped 0.5 percent on Wednesday.
US West Texas Intermediate (WTI) crude futures were up 90 cents, or 1.7 percent, at $54.66 a barrel. WTI fell 0.26 percent in the previous session.
“It’s a very mixed bag of factors. In the US (oil) demand is likely to be picking up into summer and the OPEC meeting looks like there’s going to be an extension or even more cuts is a possibility,” said Phin Zeibell, senior economist at National Australia Bank.
After swelling to near two-year highs, US crude stocks fell by 3.1 million barrels last week, compared with analyst expectations for a draw of 1.1 million barrels, the Energy Information Administration (EIA) said.
Refined products also posted surprise drawdowns due to a rise as gasoline demand ticked higher on a weekly basis and surged 6.5 percent from a year ago.
Members of the Organization of the Petroleum Exporting Countries (OPEC) agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.
Momentum for an agreement appeared to be building as the United Arab Emirates’ energy minister told Al-Bayan newspaper that an extension is “logical and reasonable.”
Expectations the US Federal Reserve could cut interest rates at its next meeting and confirmation that the chief US trade negotiator will meet his Chinese counterpart before a meeting between President Donald Trump and Chinese President Xi Jinping next week are also supporting markets.
“Fresh stimulus from the largest economies will greatly improve the demand side argument. A positive outcome with the US — China would be icing on the cake,” said Edward Moya, senior market analyst at brokers OANDA.
Tensions remain high in the Middle East after last week’s tanker attacks, which boosted oil prices. Fears of a confrontation between Iran and the United States have mounted, with Washington blaming Tehran, which has denied any role.
In the latest escalation, Iran’s elite Revolutionary Guards have shot down a US “spy” drone in the southern province of Hormozgan, the Guards’ news website Sepah News said on Thursday.
“The geopolitical side is the wild card and can’t be predicted, not just the Iran concerns but also the trade meeting between Trump and Xi,” said Zeibell, adding “we expect to see an improvement in oil prices over the next month or two.”