Saudi economy shrinks by 3.7% in Q4 on lower oil revenue

Saudi Arabia’s economy contracted by 3.7% in the fourth quarter of 2023 compared to the previous year, reflecting a drop in oil revenue, the government’s statistics agency said yesterday.
The decline in real gross domestic product “was due to the decrease in oil activities by 16.4%, while non-oil activities and government activities grew by 4.3 % and 3.1 % respectively, on an annual basis”, the government’s General Authority for Statistics said, citing preliminary estimates.
The world’s biggest crude exporter is trying to transition its economy away from fossil fuels under Crown Prince Mohamed bin Salman’s Vision 2030 reform agenda, which aims to position Saudi Arabia as a tourism, business and sports hub.
Oil firm Saudi Aramco — of which the government owns 90% — had reported record profits in 2022 following the spike in oil prices spurred by Russia’s invasion of Ukraine.
But prices were lower last year and, after a series of supply cuts dating back to October 2022, the Gulf kingdom’s daily production stands at approximately 9mn barrels per day, far below its capacity of 12mn bpd.
On Tuesday, Aramco announced that, on orders from the energy ministry, it would abandon a plan to ramp up its production capacity to 13mn bpd by 2027, a decision that analysts said could reflect uncertainty about market demand in the years to come.
Taking 2023 as a whole, real, or price-adjusted GDP was down 0.9% compared to 2022, the statistics authority said yesterday.
The finance ministry had announced in December it was expecting real GDP growth of just 0.03% in 2023 and 4.4% this year. The ministry also said it was projecting a budget deficit of 2.0% of GDP in 2023 and 1.9% of GDP this year, reflecting rising spending and lower oil revenue.