Saudi Arabia’s GDP forecast to shrink 3.8% in 2020 with better performance in H2 2020

Saudi Arabia’s Ministry of Finance said the Kingdom’s real gross domestic product (GDP) is expected to contract by 3.8% this year. 
 

The real GDP 2020 forecasts were hit by the COVID-19 pandemic, the ministry said in a statement, with decline in the oil and oil-non sectors. Based on the economic indicators for H1 2020.  

The real GDP is projected to record a decline of 3.8% in FY2020 with an estimated better performance during H2 2020, as reflected in local demand leading indicators, mainly in private consumption, some production indicators and sector performance.  

This comes as a result of the government measures, in addition to the continued improvement in curbing the pandemic. 

The Kingdom’s economy kicked off the year with strong performance, as the non-oil sector grew by 1.6% in the first quarter backed by a 1.4% growth in the private sector growth. 

The pandemic crisis and the precautionary measures, including the imposition of partial and total curfews and the suspension of domestic and international flights since March 2020, have significantly affected the economic performance in Q2 2020. 

“During this period the real GDP has declined by nearly 7%, driven by a decline in real oil GDP of 5.3% as well as a decline in real non-oil GDP of 8.2%. The private sector also witnessed a sharp contraction of 10.1% during the same period,” the statement added.
 

In the first half of 2020, the real GDP contracted by 4%, due to a decrease in real oil GDP by 4.9%, and a reduction in the oil production until the end of H1 2020, in line with the OPEC+ output cut deal.

Meanwhile, the real non-oil GDP shrank by 3.3% in H1 2020, amid the COVID-19 pandemic. The private sector activity saw a steep decline of 4.3%, due to the overall decrease in the non-oil economic activity.

The monthly economic indicators witnessed significant improvement during Q3 2020, as economic activities have gradually reopened. 

“These developments shall also impact the coming year, as the preliminary estimates indicate real GDP growth of 3.2% in FY2021,” the ministry added.