21 June 2021
1 mins clock icon

Saudi Arabia: Oil cuts weigh on Q1 21 GDP growth

Non oil GDP grew 2.9 percent year on year in the first quarter.

By Khatija Haque


Saudi Arabia’s non-oil sectors grew just 0.1% q/q and 2.9% y/y in Q1 2020, according to preliminary data.  Manufacturing grew almost 12% off last year’s low base, although this was partly due to strong growth in oil-related manufacturing.  Utilities, trade & hospitality and financial services all posted solid y/y growth in the first quarter of this year, but the q/q metrics were weaker, likely due to tighter Covid-related restrictions that were re-imposed in February. 

PMI data had pointed to a recovery in the non-oil sectors in Q1 21 and the surveys for April and May suggest that the pace of growth accelerated in Q2.  We expect non-oil GDP growth to accelerate at a double-digit rate this quarter off the low annual base (recall the kingdom was in lockdown in Q2 2020) before moderating in H2 2021.   At this stage we retain our 4.0% non-oil growth estimate for 2021, but we recognise that the risks to our forecast are skewed to the upside.

Saudi Arabia GDP growth

Source: Haver Analytics, Emirates NBD Research

The oil sector contracted -8.8% q/q and -11.7% y/y in Q1 2021 as the kingdom made additional production cuts in February.  Consequently, headline GDP contracted -3.6% q/q and -3.0% y/y in the first quarter of this year.  While these cuts are being gradually unwound, OPEC+ appears to be taking a conservative stance on output, and as a result we expect the oil sector to be drag on headline GDP growth through 2021. We retain our forecast of 0.7% real GDP growth in Saudi Arabia this year and expect growth to accelerate to over 6% in 2022 on higher oil production and a faster non-oil sector growth.


Written By

Khatija Haque Head of Research & Chief Economist

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

More from Khatija Haque

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.