JEDDAH: Saudi Arabia’s gross domestic product (GDP) grew at its fastest pace in over a year at 3.79 percent during the second quarter of this year, reaching SR617.88 billion compared to SR595.31 billion for the same quarter of the previous year.
However, at current prices the GDP value fell by 11.93 percent to SR631.03 billion but the figure is still up from a revised 2.3 percent in the first quarter, according to a report by the Department of General Statistics and Information.
Commenting on the GDP figures, John Sfakianakis, Middle East director at Ashmore Group, told Arab News: “It is unlikely for the economy to maintain for the remainder two quarters growth of 3.8 percent. There would be a deceleration in growth especially as seasonal effects kick in such as the prolonged summer and Haj holidays in September. This would have an impact on the bottom line of business activity.”
He added: “The economy is coping well with cheaper oil prices. Oil prices have fallen by more than 50 percent yet economy has not decelerated by an equal amount. It is expected that the economy should grow by 3 percent this year which is not bad at all.”
The Saudi private sector recorded a rise in its value in real terms by 3.09 percent, and at current prices traded higher in value by 5.28 percent, rising to SR293.19 billion in the second quarter of this year, compared to SR278.49 billion in the corresponding quarter of the previous year.
Fahad M. Alturki chief economist and head of research at Jadwa Investment,said: “The Saudi growth is higher but dynamics of growth are different than last year. Oil sector takes the lead this time.”
He added: “Despite some moderation in the private sector, the nonoil sector continues to grow at a healthy rate compared to regional and emerging economies. We expect this growth to remain solid for the rest of the year.”
The Saudi Press Agency, quoting the statistics department report, said the electricity and gas activity and water witnessed the biggest increase among the activities of this sector, where the value at current prices increased by 11.20 percent compared with the corresponding period of the previous year. It said the value of gross domestic product of the oil sector decreased at current prices during the second quarter of this year by 39.07 percent, while its real value prices rose at the rate of 5.1 percent, compared with its value during the same period of the previous year.
Mohamed Ramady, senior adviser, Partner-Energy, said: “The Saudi economy will still remain hostage to the vagaries of oil prices and as these are expected to remain weak within the $45-$55 range for the rest of the year. Saudi oil GDP growth will be hard pushed to achieve an average growth rate of less than 4 percent with the nonoil sector dragging GDP down if the private sector confidence falters in the face of project cutbacks, cost savings and potential capital investment cuts in next year’s budget.”
However, he said: “Non-hydro carbon diversification is a must to sustain economic growth,”
The GDP of the government sector also achieved a rise in its value in real terms by 3.04 percent during the second quarter while its current prices increased by 22.6 percent, rising to SR138.03 billion compared to SR112.59 billion in the same period of the previous year.
The report showed that the value of oil exports at current prices decreased by 41.74 percent and the value of commodity imports at current prices fell by 9.64 percent compared with the corresponding period of the previous year.
Commenting on whether Saudi Arabia will maintain the current GDP growth for the rest of the year, London-based James Reeve, deputy chief economist and assistant general manager of Samba Financial Group, said: “No, it will not. The government is already slowing spending and is likely to cut investment spending in 2016. There is a very close correlation between nonoil growth and government spending.”