SHUTTERSTOCK/ANDREW V MARCUS
Saudi Arabia’s non-oil economic growth accelerated in the second quarter, a sign that the economy is shrugging off the effects of austerity measures that followed the collapse of crude prices five years ago, reported Bloomberg.
Non-oil gross domestic product increased by almost three per cent, the fastest pace since 2015. The Kingdom’s oil GDP shrank due to production cuts as Saudi Arabia sought to stabilise crude prices that caused overall economic growth to slow to 0.5 per cent.
Monica Malik, the Chief economist at Abu Dhabi Commercial Bank, said, “The absence of fiscal measures to cut spending and bolster government revenue, as well as the strengthening of investment momentum, are the key reasons for the improvement of business sentiment.”
The private sector confidence was also hurt by a declared crackdown on corruption in November 2017. But while the recent improvement in non-oil growth is encouraging as Saudi Arabia tries to diversify the economy, the overall picture still shows that oil is king.
Saudi Arabia has led efforts to stabilise the oil market by ending years of animosity with Russia in 2016 and joining forces to prop up prices. The price of benchmark Brent crude averaged just under $67 a barrel in the second quarter of 2019, compared with nearly $80 during the same period last year.
Output cuts by Organisation of the Petroleum Exporting Countries and its partners continue to weigh heavily on the economy, although it was dealt another blow this month after the biggest attack ever on the Kingdom’s oil facilities.