Saudi Arabia’s economy is expected to grow by about 10 percent in 2022, much higher than the current forecast of 6.3 percent, according to a report by Capital Economics.
The report came after the Kingdom’s General Authority for Statistics announced that its economy grew by 9.6 percent during the first quarter of this year, achieving the highest growth rates since 2011.
Capital Economics said: “Saudi Arabia’s economy grew by 2.2 percent quarter-on-quarter in the first quarter of the year, which translates to an annual growth of 9.6 percent – the fastest pace recorded since 2011.
With an increase in oil production and a strong prospect in terms of a looser fiscal policy, the report believes that the Kingdom’s economy will grow around 10 percent this year, which is much higher than expectations.
Growth is driven by rise in oil prices
The General Authority for Statistics reported that this growth resulted from a rise in production from all sectors, but was mainly driven by the sharp rise in the oil sector, which grew by 2.9 percent over the quarter.
Oil activities achieved a significant increase by 20.4%, in addition to the increase achieved by non-oil activities rising by 3.7%.
Following oil production being reduced by one million barrels per day last year, Saudi continued to increase oil production in accordance with the “OPEC +” agreement, , which created favorable conditions that led to an increase in production by 20.4 percent.
Oil production in Saudi Arabia reached 10.3 million barrels per day in March, which translated into a growth of 26.7 percent year-on-year.
This is also the fastest pace recorded since 2003, Capital Economics said in another report released in April.
The non-oil sector plays a pivotal role
The non-oil sector witnessed growth as the economy continued to move towards a full re-opening after the Corona pandemic.
An earlier report from Capital Economics also indicated that the non-oil sector has rebounded strongly since the end of the Omicron wave in January 2022.
The IMF expects 7.6% growth in the Kingdom
In a recent report, the International Monetary Fund (IMF) raised its forecast for the growth rate of the economy in Saudi for the current year by 2.8 percentage points at once, to reach 7.6 percent, and also increased its estimates for the growth rate for next year by 0.8 percentage points to record 3.6 percent, against the backdrop of the expected gains from higher oil prices.
Although the Fund expects that growth in the MENA, the Caucasus and Central Asian countries will be affected by the consequences of the war in Ukraine, such as the rise in food prices, especially wheat, it is likely that “oil-exporting countries will benefit from their gains generated from higher energy prices, which will compensate for this impact.”
The Fund stated in the “World Economic Outlook” report: “We raised our estimates of the growth rate of the Saudi economy by 2.8 percentage points, which reflects the increase in oil production in accordance with the OPEC + agreement, in conjunction with the outperformance of the growth of non-oil output than expectations.”