Saudi economy warms up as private spending rises

The Saudi economy is now showing renewed signs of life, according to Bloomberg Economics’ activity heat map. (Reuters)
Updated 11 May 2019
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Saudi economy warms up as private spending rises

  • Bloomberg Economics expects non-oil growth to average 2.6 percent this year, helped by fiscal stimulus
  • The steep decline in oil prices since 2014 has led to budgetary deficits across oil exporting Gulf economies as they seek to reduce their reliance on hydrocarbons

LONDON: Rising private sector consumption and government fiscal stimulus measures are expected to give a boost to the Saudi economy, according to new research from Bloomberg Economics.
It expects non-oil growth to average 2.6 percent this year, up from 2.1 percent in 2018, helped by fiscal stimulus, a lower drag from monetary policy and more spending by the public.
But it is not year clear if the pickup will help to reduce the budgetary deficit.
“In theory, higher growth should reduce the budget deficit,” Ziad Daoud, chief Middle East economist at Bloomberg Economics told Arab News. “But cause-and-effect flows in the opposite direction in this case: The recent uptick in growth was largely driven by higher government spending.”
The steep decline in oil prices since 2014 has led to budgetary deficits across oil exporting Gulf economies as they seek to reduce their reliance on hydrocarbons, roll back state subsidies and seek to boost growth in non-oil industries and services.
A government crackdown on corruption in the Kingdom saw some funds leave the country that may have otherwise been invested domestically.
At the same time the introduction of valued added tax (VAT), costlier fuel prices and rising expatriate levies caused growth in the non-oil economy to slow to 1.6 percent in the first quarter of 2018 compared to 2.3 percent in the third quarter of 2017.
But the Saudi economy is now showing renewed signs of life, according to Bloomberg Economics’ activity heat map. A number of indicators are picking up, showing non-oil growth has returned to levels seen before the corruption purge, it said.
However, while the economy might be showing signs of recovery, it’s still a long way short of the growth rates achieved during the oil-boom of 2004-13, which averaged 7.7 percent a year.
Growth remains mainly driven by an oil financed fiscal stimulus package rather than the private sector, Bloomberg Economics said.


China’s crude oil imports from Saudi Arabia up 43%

Updated 25 May 2019
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China’s crude oil imports from Saudi Arabia up 43%

  • Imports grew to 1.53 million barrels per day compared with 1.07 million a year ago
  • Sinopec Group and China National Petroleum Corp., the country’s top state-owned refiners, are halting Iranian oil purchases for loading in May, three people with knowledge of the matter said

BEIJING: China’s crude oil imports from Saudi Arabia rose 43 percent in April, making the Middle Eastern OPEC kingpin once again the top supplier to the world’s second-biggest economy, boosted by demand from new private refiners.
Saudi imports grew to 6.30 million tons, or 1.53 million barrels per day (bpd) on a daily basis, compared with 1.07 million bpd in the year ago period, according to data from the General Administration of Customs released on Saturday.
Saudi shipments were supported by higher refinery run rates at Hengli Petrochemical Co. Ltd, with production at the 400,000 bpd-capacity refinery in northeast China expected to reach optimal levels in late June. About 70 percent of the feedstock for Hengli came from Saudi Arabia.
Meanwhile Russian supplies were 6.12 million tons, or 1.49 million bpd, up from 1.35 million bpd in April last year.
China in April imported 3.24 million tons of crude oil from Iran, or 789,137 bpd, up from March’s 541,100 bpd, as companies ramped up buying before the scrapping of sanctions waivers the US had granted to big buyers of Iranian oil.
China Petrochemical Corp. (Sinopec Group) and China National Petroleum Corp. (CNPC), the country’s top state-owned refiners, are halting Iranian oil purchases for loading in May, three people with knowledge of the matter said.
Venezuela shipments stood at 1.9 million tons, or 462,813 bpd in April, up 85 percent versus 249,700 bpd in March, while crude imports from Iraq were 3.31 million tons, or 806,372 bpd, down from 904,500 bpd the previous month.