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Saudi Arabia's economy will shrink by 1.3% this year due to the OPEC+ oil production cuts, effecting one of the worst economic performances in the GCC, according to Capital Economics.
Saudi Arabia has voluntarily reduced its oil output by 1 million barrels per day (bpd), to 8.98 million bpd, which will be rolled over until year-end.
"In turn, we think that oil GDP will contract by 10.3% in 2023, directly knocking over 4 percentage points from headline GDP growth this year," economist James Swanston said in a note on Monday.
Meanwhile, the IMF projected Saudi Arabia's real GDP growth at 0.8% for 2023, which is among the lowest in the region. However, growth is projected to rise to 4% in 2024. The fund projected non-oil GDP at 4.9% for 2023, dipping to 4.4% in 2024.
Capital Economics said Saudi Arabia cut its output by over 0.5 million bpd in Q2. "This more than offset another strong outturn from the non-oil private economy."
"We think that the non-oil sector will remain strong over the rest of this year and have pencilled in non-oil GDP growth of 5.0% for 2023 as a whole. The sharp contraction in the oil economy will more than offset this and is why we expect the Saudi economy to contract by 1.3% in 2023, which is among the most bearish forecasts of analysts polled by FocusEconomics."
However, over the coming years with the government committed to sustaining its loose fiscal stance and oil output rising, economic growth will pick up, with the GDP growth hitting 6.3% in 2025, the consultancy added.
(Writing by Brinda Darasha; editing by Seban Scaria)
