Jack Dutton. October 31, 2023
Saudi Arabia’s real gross domestic product (GDP) fell by 4.5% in the third quarter of this year, according to preliminary government data released Tuesday, as voluntary oil cuts by the world’s largest crude exporter weighed on the economy.
The kingdom was the fastest-growing economy in the G20 group of nations last year, reaching 8.7% growth as oil climbed to around $100 per barrel and the Gulf state recorded its first budget surplus in a decade. Saudi GDP also passed $1 trillion for the first time.
But in the third quarter of this year, Saudi Arabia’s economy shrunk by the most since the COVID-19 pandemic in 2020, due to oil cuts. It was also the first output drop since 2021. Brent crude was $87.50 as of 1:45 pm Eastern Time on Tuesday.
Data from the General Authority for Statistics on Tuesday showed that oil activities contracted by 17.3% in the third quarter compared to the same quarter of 2022, causing overall growth to decline despite non-oil growth of 3.6% and government activities expanding by 1.9%.
Saudi Arabia has implemented a voluntary oil production cut of 1 million barrels a day since July in what it says is a bid to stabilize the market amid the price of oil being low compared to last year. The kingdom now produces around 9 million barrels a day. It intends to keep those cuts in place until at least the new year, and it already had some other production reductions in place as part of the influential Organization of Petroleum Countries group.
Oil exports account for about 80% of Saudi Arabia’s export revenues. Being the Middle East’s largest economy, Saudi Arabia’s sluggish growth will also weigh down the economies of other states in the region.
In April, the International Monetary Fund cut the Saudi growth outlook by 1.2 percentage points due to the cuts in oil production and exports. In July, growth projections by the IMF for the Middle East and North Africa were also dimmed, with Saudi Arabia’s economic slowdown being one of the main reasons for the outlook revision.