In December 2023, Saudi Arabia’s industrial landscape witnessed a 0.4 percent increase driven by its mining and quarrying sector, according to recent data from the General Authority for Statistics (GASTAT).
Despite challenges including the kingdom’s decision to cut oil production, the industrial production index (IPI) remained resilient compared to the previous month.
Mining and quarrying
The mining and quarrying sector registered a 1.4 percent month-on-month increase in activity in December. According to GASTAT, this surge played a pivotal role in bolstering the overall industrial production for the month. However, compared to 2022, the sector saw a 14.3 percent decline. This is due to Saudi Arabia’s commitment to reducing oil output to 8.9 million barrels per day.
Impact of oil output cuts
Saudi Arabia’s decision to reduce oil output by 500,000 barrels per day started in April 2023 and extends until the end of December 2024. Moreover, the country pledged an additional oil output cut of 1 million barrels per day in July which continued until the end of December 2023.
This decision had profound implications for the industrial production index. The index experienced a significant downturn of 10.5 percent in December 2023 compared to the same period in 2022. This reduction was primarily attributed to the kingdom’s adherence to the OPEC+ agreement, aimed at stabilizing global oil markets.
Sectoral weights
While mining and quarrying showcased growth, Saudi Arabia’s manufacturing sector saw a decline of 3.3 percent in December 2023 compared to the same period in 2022. The decrease in manufacturing activity contributed to the stagnation of the industrial production index. Meanwhile, electricity and gas supplies increased by 25.8 percent.
Although Saudi Arabia’s industrial production exhibited resilience in December 2023, challenges stemming from oil output cuts continue to exert pressure on the economy. The Kingdom’s concerted efforts to navigate these challenges underscore its commitment to global market stability while seeking avenues for diversified economic growth.
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