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Saudi Arabia's economy is set to grow by 7 percent year-on-year in 2022 due result of significantly higher oil sector growth and robust levels of non-oil growth, Riyadh-based Jadwa Investment said.
The strong level of growth of this year is expected to continue into next year, the investment bank said in a report on Tuesday.
International Monetary Fund said in July the kingdom is expected to grow 2.4 per cent this year and 4.8 per cent in 2022.
According to Jadwa, within the oil sector, growth will be driven by higher Saudi crude oil production, in-line with yearly rises in global oil demand.
"We note that circa 40 percent of OPEC+’s spare capacity resides with Saudi Arabia, and thus any uplift in demand will likely be met with proportionally higher oil supply from the Kingdom."
In terms of the non-oil sector, despite a moderation in year-on-year growth the economy will be driven forward by the continued implementation of the Vision 2030, Jadwa said.
According to a finance ministry report, Saudi Arabia’s oil sector revenue grew 60 percent year-on year in Q3-2021 to nearly 148 billion riyals while non-oil revenue in Q3 contracted 22 percent year-on-year to 95.4 billion riyals.
Jadwa said the Saudi economy will be supported by another sizable outlay in government expenditure, which, despite declining on a yearly basis in 2022, is still set to total just under 1 trillion riyals. “Overall, we expect the Kingdom’s non-oil private sector to grow by 3.2 percent in full year 2022.”
Additionally, both the Public Investment Fund (PIF) and the National Development Fund (NDF) will be the engines of capital deployment and economic development in the Kingdom, as detailed in the recently unveiled National Investment Strategy (NIS).
Jadwa said the main risk to its forecast is related to the disruptive nature of Covid-19, or, more specifically, to global developments related to the ‘Omicron’ variant seen in the last few days.
“As it stands, it is too early to gauge the full impact of the variant on the Saudi economy, especially so without knowing to what extent, if any, the variant poses a threat to the current crop of Covid-19 vaccines' effectiveness."
(Reporting by Brinda Darasha; editing by Daniel Luiz)
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