Saudi fourth-quarter GDP expands 3.59%, gets boost from oil sector

‘The oil sector led the recovery in the final quarter, reflecting stronger production’, said Monica Malik, chief economist at Abu Dhabi Commercial Bank. (AFP)
Updated 31 March 2019

Saudi fourth-quarter GDP expands 3.59%, gets boost from oil sector

  • ‘The oil sector led the recovery in the final quarter, reflecting stronger production’
  • The Saudi economy has suffered in recent years because of low oil prices and austerity measures

DUBAI: Saudi Arabia’s economy grew in the fourth quarter of last year at its fastest rate since early 2016 due to an expansion in the oil sector, while non-oil growth was sluggish, statistics agency data showed on Sunday.
Fourth-quarter gross domestic product grew by 3.59 percent from a year earlier. In the third quarter, annual growth was 2.5 percent.
“The oil sector led the recovery in the final quarter, reflecting stronger production, particularly at the beginning of the quarter,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
The Saudi economy has suffered in recent years because of low oil prices and austerity measures aimed at reducing a huge budget deficit.
In 2017, the economy shrank for the first time since the global financial crisis almost a decade earlier.
“We expect the headline growth figure to moderate in 2019 as Saudi implements oil production cuts,” Malik said.
Saudi Arabia’s economy grew by 2.21 percent in 2018, government data showed in January, without breaking down fourth-quarter figures.
Last week, state-owned Saudi Aramco announced it had agreed to buy a majority stake in Saudi Basic Industries Corp. (SABIC) from the Saudi sovereign wealth fund, Public Investment Fund (PIF), for $69.1 billion.
The deal could boost economic growth as the sovereign fund gains more firepower to proceed with its plans to create jobs and diversify the largest Arab economy beyond oil exports.
Dubai-based Arqaam Capital said in a research note on Sunday the acquisition is expected to boost credit growth, “as corporate activity on increased award momentum continues to improve particularly toward the end of the year and potentially on loans from Aramco to fund the purchase of SABIC.”
Malik said economic growth in 2019 would be impacted by how the PIF implements investments.
“Our assumption is that the SABIC sale will boost PIF’s investments in the second half of the year,” she said.


Saudi defense contractor to invest up to $16 million to further localize services

Updated 18 November 2019

Saudi defense contractor to invest up to $16 million to further localize services

DUBAI: Saudi-based defense contractor Middle East Propulsion Company (MEPC) plans to invest between $13 million and $16 million over the next two years to build test cells for aircraft engines and establish new production lines.
These expansion activities should complement the company’s objective to localize high-tech repairs and combine them in one roof for the Saudi defense ministry, which is a major customer, CEO Abdullah Al-Omari told Arab News.
Instead of sending aircraft engines and engines modules overseas for further servicing, thus take up more time before military assets return to actual service, localization not only cuts the turn-around period but also reduces Saudi government spending for the repairs.
“We have accomplished more than 1,600 engine and engine modules [since 2001, they] have been maintained totally in Saudi Arabia,” Al-Omari said at the sidelines of the Dubai Airshow. “The engines consume 45 percent of what you spend on aircraft.”
The company works on 150 to 160 engines and engine modules every year.
MEPC is the first specialized MRO (maintenance, repair and overhaul) company operating in the Middle East, according to its website. It has invested over $26 million during the previous two years for the localization of its MRO services.
“We used to send these parts to outside, it takes 6 months to 24 months sometimes … in case of the Apache engines, minimum turn around is 24 months,” Al-Omari said, but their localization efforts have greatly improved their capability by cutting the turn-around period to only 150 days.
The speed at which MEPC is able to repair engines and modules, boosts the readiness of Saudi military, Al-Omari added.
The company is in talks with major defense contractors, including Honeywell for the Abrams talks and GE T700 engines, for possible tie-ups to further improve their capability, he said.
“Currently there is a potential with the Kuwait army to provide them with similar services [being delivered to the Saudi defense ministry],” Al-Omari said, and expects that cooperation would start “within the next two years or so.”