DUBAI: Saudi consumers are helping to fuel a recovery in the Kingdom’s economic fortunes, according to a new report from Bloomberg.
Higher spending is pushing the non-oil sector of the economy back to pre-pandemic levels, according to Ziad Daoud, chief emerging markets economist for the information and media group.
Added to other economic data, the figures suggest that non-oil GDP growth ended 2020 at zero, representing a big recovery in the second half after one of the largest contractions ever in the second quarter — 8 percent down.
“Saudi Arabia’s non-oil activity plunged sharply in the second quarter of last year, as the COVID-19 outbreak paralyzed the economy, before rebounding in the second half. Was the recovery strong enough to return non-oil GDP to its pre-virus peak? Monthly gauges suggest yes, or at least very close to it,” Daoud said.
In addition to consumer spending, another measure of non-oil activity, the Markit Purchasing Managers’ Index, showed steady expansion in the final quarter of last year, implying non-oil growth.
The consumer spending indicator adds together expenditure in the form of cash withdrawals from ATMs, the value of cheques cleared and electronic point of sales transactions. It is thought that the pandemic lockdowns accelerated the trend towards electronic payments compared with the others.
Bloomberg is forecasting 3.6 percent growth in the non-oil sector in the Kingdom in 2021. This level of recovery is stronger than that of many emerging markets.
The non-oil sector is regarded as an important measure of activity, generating both jobs and corporate profits.
Declining oil revenues, because of lower crude prices and cuts to production by Saudi Arabia and other producers in 2020, mean that the overall economic slowdown has been significant. The Kingdom’s General Authority for Statistics said recently that overall GDP declined by 4.1 percent. Its projection for 2021 GDP growth is expected next month.
The International Monetary Fund is forecasting 2.6 percent overall GDP growth for Saudi Arabia this year.
One reason for the recovery in consumer spending is believed to be the fact that the pandemic had less impact on the Kingdom in terms of severity and case numbers, compared to many countries in the region and around the world.