Saudi Arabia’s real Gross Domestic Product (GDP) grew by 6.8 percent in Q3 of 2021, compared to Q3 of 2020, according to the latest flash estimates by the General Authority for Statistics (GSA).
In the Authority’s most recent report, the positive growth was attributed to the high increase in oil activities by 9 percent due to rising world demand for crude oil and the expansion of Saudi production in 2021. Non-oil activities increased by 6.2 percent, and government activities increased by 2.7 percent year on year.
According to official data from the World Bank, the Kingdom’s GDP was worth USD 700.12 billion (SAR 2.6 trillion) in 2020. Additionally, the GDP value of Saudi Arabia represents 0.62 percent of the world economy.
Oil vs. Non-Oil Activities.
- Oil activities: activities that include crude oil, natural gas, and refining
- Government activities: the activities of all government entities included in the Saudi government’s final budget
- Non-oil activities: all other economic activities except oil activities and government services activities
Saudi GDP Growth Explained
According to Reuters, seasonally adjusted GDP grew 5.8 percent quarter-on-quarter on the back of 12.9 percent growth in oil activities. London-based Capital Economics also stated that the Kingdom’s economy is expected to have grown by around 5.7 percent in Q3 of 2021, attributing to a “more robust” hydrocarbon sector output, adding the expected expansion would leave the Saudi GDP approximately 1 percent above its pre-pandemic level.
“Saudi Arabia’s economic recovery looks to have picked up speed in Q3 and should remain strong over the rest of this year and 2022, underpinned by rising oil output. Looking ahead, as oil production rises, virus restrictions are relaxed further, and the government leans towards loosening fiscal policy, the recovery is likely gather momentum,” the report stated.
Capital Economics also forecasts GDP growth to be 2.5 percent this year and 7.3 percent in the next year, with projections lying above the consensus.
GDP Growth and COVID-19
The largest of all Arab countries, the Kingdom’s economy struggled in the wake of both the COVID-19 pandemic and record-low oil prices.
However, Reuters reports that the economy has rebounded significantly this year amid the easing of coronavirus-related restrictions, a vaccine roll-out, and those above higher crude oil prices.
Riyadh-based Jadwa Investment also stated that the Kingdom is expected to see a narrower fiscal budget deficit this year, with the Ministry of Finance recently outlining that the fiscal deficit is expected to hit SAR -85 billion (-2.7 percent of GDP) in the full year of 2021.
Jadwa even predicts that the number could be lower, at around SAR -67 billion (or -2.1 percent of GDP)
“With Brent oil prices currently trading above $80 per barrel, there is a strong possibility that full year 2021 government oil revenue could surpass our current estimate of SR528 billion,”
As for non-oil revenues, the Kingdom’s income from the Value-added tax (VAT) contributed 70 percent of non-oil revenues during the third quarter of 2021, with Jadwa Investment calling the VAT a “key component” of non-oil revenue.