Amidst efforts to reduce dependence on oil, Saudi Arabia’s non-oil sector experienced a commendable growth of 4.6 percent in 2023. This positive development aligns with the Kingdom’s strategic goal of fostering a more diverse and resilient economy.
However, despite this positive trend, the country’s overall economic performance faced challenges, with a decline in real gross domestic product (GDP) and a notable reduction in oil activities, according to a General Authority for Statistics (GASTAT) report.
Saudi Arabia’s overall gross domestic product (GDP) faced a decline of 0.9 percent in 2023 compared to the previous year. This dip is mainly due to a significant reduction in oil activities, following the decision of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), to cut oil output.
OPEC+ decisions
Saudi Arabia’s oil sector witnessed a substantial decline of 9.2 percent in 2023 which supported its non-oil sector performance. That is directly influenced by the Kingdom’s commitment to cut crude output in alignment with OPEC+ decisions.
In April 2023, OPEC+ agreed to reduce oil output by 1.2 million barrels per day. Moreover, Saudi Arabia extended its commitment to oil cuts until December 2024. The Kingdom also implemented an additional output cut of 1 million barrels per day from June to December 2023.
Fourth quarter rebound
Despite the overall decline, Saudi Arabia’s GDP recorded a growth of 0.4 percent in the fourth quarter of 2023 compared to the previous three months. This resurgence was fueled by a 2.6 percent increase in Saudi Arabia’s non-oil sector activities. Moreover, government activities also played a role, surging by 1.1 percent. Meanwhile, the oil sector experienced a decline of 2.7 percent.
On the other hand, Saudi Arabia’s real GDP contracted by 3.7 percent in the fourth quarter of 2023 compared to the same period in 2022. This contraction was primarily driven by a significant 16.4 percent decline in oil activities. However, Saudi Arabia’s non-oil and public sector activities showcased resilience, growing by 4.3 percent and 3.1 percent, respectively.
Inflation and price insights
Recent reports from the General Authority for Statistics (GASTAT) also shed light on inflation trends. In December 2023, Saudi Arabia’s inflation dropped to 1.5 percent, compared to 1.7 percent in the previous month. Additionally, the Wholesale Price Index increased by 0.4 percent in December 2023, driven by a rise in the prices of other transportable goods, which increased by 0.8 percent.
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