Saudi Arabia GDP (Q2) - Capital Economics
Middle East & North Africa Economics

Saudi Arabia GDP (Q2)

Middle East Data Response
Written by Jason Tuvey

Saudi Arabia’s economy contracted by 7.0% y/y in Q2 on the back of the virus containment measures and oil production cuts. And even though containment measures have started to be lifted, the imposition of harsh fiscal austerity in recent months means that the recovery will be weak.

Economy slumps, recovery already stuttering

  • Saudi Arabia’s economy contracted by 7.0% y/y in Q2 on the back of the virus containment measures and oil production cuts. And even though containment measures have started to be lifted, the imposition of harsh fiscal austerity in recent months means that the recovery will be weak.
  • Figures just released showed that, after contracting by 1.0% y/y in the first three months of the year, Saudi GDP declined by 7.0% y/y in Q2. (See Chart 1.) This was the largest year-on-year drop in GDP since the quarterly series began in 2010. That said, on a seasonally-adjusted basis, GDP fell by 4.9% q/q – among the smaller declines in GDP recorded across the world in Q2.
  • The breakdown of the data showed that the weakness was, unsurprisingly, concentrated in the non-oil sector. Output across the non-oil sector as a whole contracted by 8.2% y/y after the authorities imposed a strict lockdown in order to try to contain the virus. Private sector activity dropped by 10.1% y/y, while public sector output fell by a more modest 3.5% y/y. (See Table 1.)
  • The oil sector also continued to struggle. Output fell by 5.3% y/y, a little worse than the 4.6% y/y drop recorded in Q1. Crucially, though, oil production was ramped up in April after OPEC+ talks collapsed which will have cushioned the blow from the output cuts that eventually took effect from May.
  • On the expenditure side, household consumption and investment declined by 17.0% y/y and 24.8% y/y respectively in Q2. Government consumption also fell, albeit by a modest 0.6% y/y. Net trade provided a large boost to GDP as a 27.9% y/y slump in imports more than offset a 6.9% fall in exports.
  • Overall, the Q2 GDP figures were not as bad as we had feared and, while we will firm up our forecasts in our forthcoming Outlook, it looks like the economy will now post a contraction of around 5.0% over 2020 as a whole (previous: -7.3%). That said, the latest data suggest that, after an initial jump in activity as containment measures were eased, the recovery is already stuttering. (See here.) Continued oil output cuts and the imposition of harsh austerity means that the recovery will be slow-going.

Chart 1: Saudi GDP (% y/y)

Sources: CEIC, General Authority for Statistics

Table 1: Saudi GDP by Sector

GDP

Oil

Non-oil

Non-oil Private

Non-oil Gov’t

% y/y

% q/q

% y/y

% y/y

% y/y

% y/y

Q3 2019

-0.5

-0.6

-6.4

4.3

4.2

4.6

Q4 2019

-0.3

0.3

-5.8

3.8

5.2

1.1

Q1 2020

-1.0

-0.9

-4.6

1.6

1.4

1.9

Q2 2020

-7.0

-4.9

-5.3

-8.2

-10.1

-3.5

Sources: CEIC, General Authority for Statistics


Jason Tuvey, Senior Emerging Markets Economist, jason.tuvey@capitaleconomics.com