Saudi Arabia's economy had a strong showing in the first quarter of 2018, thanks to rising oil prices and a surge in the non-crude sector, authorities said Sunday. The National Accounts publication of the first quarter of 2018 showed a significant recovery with annual real GDP growth of 1.2% in Q1, 2018 year-on-year, according to the General Authority for Statistics.
This positive recovery follows four consecutive quarters of recession. This indicates a recovery in the Saudi economy following the slowdown in 2017. Moreover, it is evidence of the resilience of the Saudi economy and its ability to recover from both the reduction in oil prices and the structural reforms.
The recovery comes as a result of the accelerated growth both in the oil and non-oil sectors. The oil sector grew by 0.6% in the first quarter of 2018 compared to a 4.3% drop in the same quarter in 2017. On the other hand, the non-oil sector grew by 1.6% in the first quarter 2018 compared to 1.3% growth for Q1 2017 year-on-year.
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The main drivers behind the recovery was growth in the non-oil manufacturing and mining sectors by 4.6% and 6.3%, respectively. Moreover, pursuant to Vision 2030, these sectors are expected to lead the Kingdom’s future economic growth.
Government services and financial services sectors also played a role in the non-oil sector growth. Specifically, government services sector grew by 3.4% compared to 3.2%, while financial services sector grew by 2.1% compared to 0.8% for the same period in 2017. The growth in both sectors is expected to continue rising due to listing the Saudi stock market in the MSCI as well as implementation of financial sector program initiatives.
Although the construction sector continued shrinking, the pace of shrinkage was slower paced: 2.4% compared to 3.5% in the fourth quarter in 2017. This is a result of the completion of mega projects.
The retail and hospitality sectors decreased by 0.5% in the first quarter compared to a growth by 1.4% in the fourth quarter in 2017. This is an expected behavior which came as a result of more rationalized spending for households due to implementation of the VAT.
The reports of growth come as Crown Prince Muhammad Bin Salman pushes a package of sweeping economic and social reforms in the Kingdom.
As part of his Vision 2030 plan, the Crown Prince plans to reduce Riyadh's dependence on oil, boost tourism and massively invest in the underdeveloped entertainment sector to increase domestic spending.
Crude prices have remained strong even after oil producers said last week they plan to increase output starting in July.
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