Saudi oil sector expands 5.1%

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TEAM EFFORT: Increasing supplies of natural gas is essential for the Kingdom’s economic growth.
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Updated 04 July 2016
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Saudi oil sector expands 5.1%

JEDDAH: Saudi Arabia’s economy expanded at its slowest rate in three years during the first quarter of 2016, official data showed.

Some analysts said the data pointed to a risk of growth in Saudi Arabia slowing to near zero this year, which would be its worst performance since the global financial crisis of 2009.
Gross domestic product, adjusted for inflation, grew 1.5 percent from a year earlier between January and March, down from a revised growth rate of 1.8 percent in the fourth quarter of 2015, the state statistics office said. It was the slowest growth since 0.3 percent in the first quarter of 2013.
The oil sector expanded 5.1 percent in the first quarter of this year as Saudi Arabia increased its production of crude and exported more refined products.
But the non-oil sector shrank 0.7 percent, its worst performance in at least five years.
“The important thing to remember is that austerity will be a multi-year process. There will be more measures in the next few years and these will continue to keep growth subdued,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Within the non-oil part of the economy, the private sector grew just 0.2 percent in the first quarter while the government sector shrank 2.6 percent, the official data showed.
The weakness of the non-oil sector was partly due to the fact that the first quarter of 2015 was unusually strong; in January that year, authorities awarded public employees two months’ extra salary to mark his accession to the throne.
But the fourth-quarter 2015 growth rate of 1.8 percent was revised down sharply from an original estimate of 3.6 percent. That points to the possibility of a similar revision for the first-quarter figures.
Malik said ADCB was cutting its Saudi GDP growth forecast for the whole of this year to a drop of 0.1 percent, from a previous prediction of 0.5 percent growth.
She noted that while private sector and non-oil activity could pick up slightly from the second quarter of this year, partly because there were signs that the government was paying some of its outstanding bills to private firms, oil output was not continuing to rise significantly year-on-year.
If the economy slows excessively, the government still has the option of spending more to stimulate growth; the central bank holds $573 billion of net foreign assets, and Riyadh has begun borrowing abroad this year to finance some expenditure.
But if it eases up on its austerity program too much it may increase pressure on the Saudi riyal’s peg against the US dollar, fueling concern among some foreign investors about the long-term sustainability of its economy.
In a report released late last month, London-based Capital Economics said it was expecting growth of between zero and 0.5 percent this year.
“Further ahead, as the fiscal squeeze continues, we think the economy is likely to remain weak for the foreseeable future.”


China sees ‘enormous potential’ in Saudi economy as crown prince visits

Updated 57 sec ago
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China sees ‘enormous potential’ in Saudi economy as crown prince visits

  • China supports Saudi Arabia’s efforts to diversify its economy and is willing to strengthen high-tech cooperation, State Councillor Wang Yi said
  • Saudi Aramco is set to sign a pact to build a refinery and petrochemical project in Liaoning province in a joint venture with China’s Norinco

BEIJING: China sees “enormous potential” in Saudi Arabia’s economy and wants more high-tech cooperation, the Chinese government’s top diplomat said, as Saudi Crown Prince Mohammed bin Salman began a two-day trip to Beijing.
The Saudi delegation, including top executives from Saudi Aramco, arrived on Thursday on an Asia tour that has already seen the kingdom pledge investment of $20 billion in Pakistan and seek additional investment in India’s refining industry.
The crown prince will meet President Xi Jinping, who has made stepping up China’s presence in the Middle East a key foreign policy objective, despite its traditional low-key role there.
Meeting Saudi Foreign Minister Adel Al-Jubeir, State Councillor Wang Yi said the main features of their ties were respect, understanding and support for each other, China’s Foreign Ministry said in a statement late on Thursday.
“All countries in the world have the right to develop, and Saudi Arabia is an emerging market country with enormous potential,” the ministry paraphrased Wang as saying.
China supports Saudi Arabia’s efforts to diversify its economy and is willing to strengthen high-tech cooperation, Wang added.
Saudi Aramco, the world’s top oil exporter, will sign a pact to build a refinery and petrochemical project in northeastern Liaoning province in a joint venture with China’s defense conglomerate Norinco, three sources with knowledge of the matter said.
The investments could help Saudi Arabia regain its place as the top oil exporter to China, a position Russia has held for the last three years. Saudi Aramco is set to boost market share by signing supply deals with non-state Chinese refiners.
China has had to step carefully in relations with Riyadh, since Beijing also has close ties with Iran.
On Wednesday, Xi told the speaker of Iran’s parliament that China’s desire to develop close ties with Iran would stay unaltered, regardless of the global situation.
China is also wary of criticism from Muslim countries about its camps in the heavily Muslim far western region of Xinjiang, which the government says are for de-radicalization purposes and rights groups call internment camps.
Wang said both countries face the threats of terrorism and extremism, and should strengthen cooperation to safeguard security and stability.
China was not seeking to play politics in the Middle East, the widely-read state-run tabloid, the Global Times, said in an editorial on Friday.
“China won’t be a geopolitical player in the Middle East. It has no enemies and can cooperate with all countries in the region,” said the paper, published by the ruling Communist Party’s official People’s Daily.
“China’s increasing influence in the Middle East comes from pure friendly cooperation. Such a partnership will be welcomed by more countries in the Middle East.”