Estimates show overall economy shrank 3.3% in first quarter
The oil sector shrank 12%, the most in at least a decade on production cuts, leading the overall economy to contract
Saudi Arabia’s non-oil economy — the engine of job creation — grew in the first quarter for the first time since the pandemic hit, even as the overall economy was dragged into contraction by oil production cuts.
The non-oil sector grew 3.3 per cent from a year earlier, according to preliminary estimates released on Monday by the kingdom’s General Authority for Statistics. The oil sector shrank 12 per cent, the most in at least a decade according to data compiled by Bloomberg, leading the overall economy to contract 3.3 per cent. Final figures are scheduled to be released in June.
Business in the world’s largest crude exporter is gradually returning to normal after the twin crisis caused by oil market turmoil and coronavirus-related lockdowns. Consumer spending is rebounding and officials plan to partially reopen the kingdom’s borders on May 17. The International Monetary Fund expects the economy to grow 2.1 per cent this year after shrinking 4.1 per cent in 2020.
The large contraction in oil GDP came after OPEC and its allies embarked on deep production cuts in May 2020 to steady crude prices. Saudi oil production fell to 8.15 million barrels a day in the first quarter, from an average of almost 10 million barrels a day a year earlier. The price of Brent crude has gradually risen to nearly $70 a barrel after hitting a low of less than $20 a barrel last year. Brent averaged $61.30 a barrel in the first quarter of 2021, compared with $50.57 a year earlier.