Higher oil prices boosting Saudi economic growth: report

The rally in crude prices bodes well for Saudi Arabia’s economic activity, Spain-based FocusEconomics said in a recent report.

“Reduced oil production in compliance with the OPEC+ deal will cause economic growth to lose steam this year. However, stronger public spending and government initiatives to foster non-hydrocarbon activities should buttress the economy,” the report noted.

It added that the Kingdom could ramp up oil production following the US decision to end the waivers on Iranian oil exports. In March, the Kingdom pumped below 10 million barrels per day for the first time in nearly one year.

On the upside, activity in the non-oil sector gained steam in the first three months of the year due to solid new domestic orders and output. Credit growth reached an over two-year high in March, largely fueled by soaring loans to the public sector as well as in oil and construction activities.

However, the apparent improvement in the non-oil economy and the ban on expats in certain jobs have not yet translated into gains in the labor market for Saudis, the report noted.

FocusEconomics expects Saudi economy to growth 1.7 percent and 2.1 percent in 2019 and 2020, respectively.