Saudi GDP growth accelerates to 3.8%

Updated 01 September 2015
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Saudi GDP growth accelerates to 3.8%

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.”


Saudi Aramco to shift more crude production to petrochemicals

Updated 23 October 2018
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Saudi Aramco to shift more crude production to petrochemicals

  • Aramco has been boosting its investments in refining and petrochemicals to secure new markets for its crude
  • Aramco hired JP Morgan and Morgan Stanley to advise on a potential acquisition of as much as a 70 percent stake in SABIC

RIYADH: Saudi Aramco aims to allocate some 2-3 million barrels per day of its crude oil production to petrochemicals, CEO Amin Nasser said on Tuesday, a sign the state energy group is hedging its bets against a possible demand slowdown.
Aramco has been boosting its investments in refining and petrochemicals to secure new markets for its crude, as it sees growth in chemicals central to its downstream expansion strategy.
The company is working on buying a stake in Saudi Basic Industries Corp. (SABIC), the world’s fourth largest petrochemical maker, as part of plans to become a leader in the chemical industry, Nasser told an investment conference in Riyadh.
But anti-trust regulations abroad will mean that the company’s planned acquisition of a controlling stake in SABIC will take time, he said, noting that SABIC has a presence in 50 countries around the world.
Aramco hired JP Morgan and Morgan Stanley to advise on a potential acquisition of as much as a 70 percent stake in SABIC, currently held by Saudi Arabia’s Public Investment Fund, sources said in July.
Nasser said the Saudi Arabian government was still committed to an initial public offering of Aramco, while the timing depended on market conditions and other factors. He added that Aramco could not list while the SABIC deal was ongoing.
Nasser also said bankers had not expressed any concerns about a recent rise in Saudi funding costs ahead of the company’s potential acquisition of the SABIC stake.
“Aramco is well positioned financially,” Nasser told reporters on the sidelines of an investment conference in Riyadh. “So far we have no issue to finance any of our projects. I don’t anticipate seeing any issues in financing.”
He also said it would take Aramco three months to reach maximum oil production capacity of 12 million bpd, if needed.
Aramco plans to raise its refining capacity to between 8 million and 10 million barrels per day, from some 5 million bpd now, and double its petrochemicals production by 2030. Aramco pumps around 10.7 million bpd of crude oil.