Saudi economy to expand fast in the coming days: Capital Economics

Saudi economy to expand fast in the coming days: Capital Economics
The second quarter data showed the Kingdom’s economy expanded by 1.1 percent quarter-on-quarter. Social media
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Updated 08 September 2021

Saudi economy to expand fast in the coming days: Capital Economics

Saudi economy to expand fast in the coming days: Capital Economics
  • Oil sector strengthened further in Q3, as crude production increased by 0.5 million bpd in July

RIYADH: Amid further easing of virus restrictions and rising oil production, Saudi Arabia’s economic growth is expected to pick up over the second half of the year and into 2022, according to a report issued by Capital Economics.

The second quarter data showed the Kingdom’s economy expanded by 1.1 percent quarter-on-quarter. The oil sector grew by 2.5 percent quarter-on-quarter on the back of the unwinding of the 1 million billion barrels per day voluntary output cut that lasted from February to April.

The non-oil sector also grew by 1.3 percent quarter-on-quarter in Q2 of 2021. However, data suggested the sector lost some steam in the third quarter. Local deliveries of cement — a proxy of activity in the construction sector — fell by 6.1 percent in July. The PMI for August also dropped from 55.8 in July to 54.1 last month.

The report said this contraction was largely due to weaker domestic and external demand.

The oil sector, on the other hand, strengthened further in the third quarter, as crude production increased by 0.5 million bpd in July taking the total to 9.4 million bpd, which was the highest output since April 2020. The increase in production volume resulted in year-on-year growth of 11.7 percent.

In a note issued on Tuesday, James Swanston, MENA economist at the research company, said despite the economic recovery “losing some steam in the third quarter,” there are signs of improvement due to various factors.

“Overall, we have penciled in growth of 4.8 percent this year and 6.3 percent in 2022. This is much stronger than the consensus forecasts of 2.4 percent and 4.6 percent respectively,” Swanston said.