RIYADH: Saudi Arabia’s economy has recently faced notable challenges, as indicated by a preliminary report from the General Authority for Statistics, which revealed a 0.4 per cent contraction in real gross domestic product (GDP) year-on-year for the second quarter of 2024.
The decline, driven primarily by an 8.5 per cent decrease in oil activities, highlights the ongoing repercussions of the kingdom’s deliberate oil production cuts. The situation is compounded by a 1.7 per cent contraction observed in the first quarter of the year, signaling a concerning trend for the largest oil exporter in the world.
Despite the overall negative growth figures, there are positive signs within the non-oil sectors. Non-oil activities registered a 4.4 per cent increase in the second quarter compared to the previous year, and government activities expanded by 3.6 per cent.
These developments suggest that while the oil sector struggles, efforts toward economic diversification may be beginning to bear fruit. Notably, seasonally adjusted GDP growth remained stable at 1.4 per cent in second quarter compared to the previous quarter, supported by a consistent rise in government activity and contributions from both oil and non-oil sectors.
Saudi Arabia’s economic landscape is currently shaped by the ambitious Vision 2030 initiative, aimed at reducing the country’s dependence on oil. This complex overhaul requires substantial investments in emerging sectors and sustainable revenue sources.
However, the scenario remains challenging, as the International Monetary Fund (IMF) recently downgraded the kingdom’s GDP growth forecast to 1.7 per cent for 2024, a reduction driven primarily by anticipated lower oil revenues. Such constraints on investment in non-oil sectors are likely to hinder broader economic expansion.
