SUMMARY
- Saudi Arabia sees a slowdown in the economic growth due to global crude price falls and voluntary oil production cuts.
- The decline in global crude prices and a slowdown in demand, in addition to China's ongoing COVID-19 restrictions.
- The Kingdom's slowdown is anticipated to affect the overall performance of the Middle East and Central Asian region.
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Saudi Arabia, one of the swiftest developing economies in the G20, saw its economic growth decelerate in the second quarter of the year due to dips in oil production and the plummeting of crude oil prices.
Second-quarter GDP data unveiled by the Saudi General Authority for Statistics on Monday revealed a mere 1.1% annual increase, in contrast to the 3.8% in the previous quarter and the colossal 11.2% growth observed in the same period last year.
In an effort to decrease its dependence on hydrocarbons, the Kingdom has been steering its focus towards non-oil sectors under Crown Prince Mohammed bin Salman's Vision 2030 program, and this sector did witness a growth of 5.5% in the second quarter. However, due to the decline in global crude prices and voluntary reductions in oil production, Riyadh, a city heavily reliant on hydrocarbons, registered a 4.2% shrinkage in its non-oil GDP.
The previous year, Saudi Arabia experienced a surge in oil prices following Moscow's full-scale invasion of Ukraine and the consequent international sanctions that disconnected many Western consumers from Russian crude supplies. This was a boon for the top oil exporter as it brought both a significant increase in prices and heightened demand for Saudi crude, which is of a quality comparable to Russia's primary supply.
However, in the first half of the current year, oil commodities haven't been as supportive of the Saudi economy. With oil prices hovering below the $80 per barrel mark, Saudi Arabia now faces the challenge of a potential recession, macroeconomic worries, diminished demand, and the prolonged effects of China’s COVID-19 restrictions.
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