The Saudi General Authority for Statistics (GASTAT) GDP and National Accounts Report indicated an expansion in non-oil activities in Saudi Arabia in the second quarter of 2024.
GASTAT attributed the growth in non-oil activities in Q2 2024 to gains achieved in the financial and insurance sectors in Saudi Arabia.
Non-oil Boom
In Q2 2024, the Kingdom’s non-oil activities recorded a 4.9% growth year-on-year. The non-oil activities in Saudi Arabia also grew 2.1% compared to the previous quarter. These figures reflect the Kingdom’s efforts to diversify its economy and reduce reliance on oil revenues.
Earlier this week, the International Monetary Fund (IMF) projected a growth in the non-oil sector by 4.4% in the medium term, driven by a surge in project implementation and strong domestic demand. Meanwhile, the IMF expected that the overall growth will reach 4.7% by 2025, as a result of the phase-out of oil production cuts.
Economic Activities
The GASTAT data showed a 3.6% increase in the government activities in Q2 2024, compared to the same period last year. It also grew by 2.3% compared to the previous quarter.
Furthermore, the report noted that most economic activities recorded positive growth on annual basis. Electricity, gas and water activities saw the highest growth in the second quarter of 2024, reaching 8.9% year-on-year, and 2.7% compared to the previous quarter.
Financial services, insurance and business services activities followed with a growth rate of 7.1% year-on-year and 1.8% quarter-on-quarter. Moreover, wholesale and retail trade, restaurants and hotel activities recorded 6.8% growth year-on-year and 1.5% quarter-on-quarter.
GDP Performance
While the real Gross Domestic Product (GDP) decreased by 0.3% in Q2 2024 compared to the same quarter in 2023, the seasonally adjusted GDP recorded a 1.4% growth compared to Q1 2024. This slight decline in the real GDP is largely due to an 8.9% decline in oil activities compared to the same period last year. However, oil activities increased by 0.9% compared to Q1 2024.
The GASTAT report also pointed out that the GDP at current prices reached SAR 1,023bn in Q2 2024. The highest contribution to the GDP went to crude oil and natural gas activities, with 23.2%, followed by government activities with 16%, and wholesale and retail trade, restaurants and hotel activities with 10.1%.
Real GDP by Expenditure
According to the report, the government final consumption expenditure saw a 10.9% growth year-on-year and 4.3% quarter-on quarter in Q2 2024. Moreover, growth fixed capital formation surged by 3.2% compared to the same period last year. However, it declined 4.5% compared to the previous quarter.
The report noted that the private final consumption expenditure grew by 2.8% year-on-year, and 1% quarter-on-quarter. Meanwhile, imports declined by 0.9% year-on-year, and 1.7% quarter-on-quarter. Additionally, exports decreased by 5.8% year-on-year and 0.6% compared to the previous quarter.
Unprecedented Economic Progress
Following the conclusion of the 2023 Article IV consultation with Saudi Arabia on July 31, 2024, the Executive Board of the IMF hailed the progress achieved in the “unprecedented economic transformation” in Saudi Arabia, as it advanced in its modernization and diversification efforts under Vision 2030.
The IMF Executive Board commended Saudi Arabia for its “its ongoing economic transformation, underpinned by sustained efforts to diversify the economy under Vision 2030.” They also welcomed the robust non-oil economic activity, stable inflation, record-low unemployment, and ample fiscal and external buffers.
Moreover, they supported the recalibration of investment spending, and agreed that the exchange rate peg to the US dollar continues to serve the Saudi economy well and the policy rate should continue to move in line with the Fed’s policy rate.
The IMF Directors also welcomed the findings of the Financial System Stability Assessment that the banking system is on a strong footing and resilient to shocks. They commended the authorities for their strong efforts to enhance the business environment, including by accelerating digitalization and enhancing governance.
Additionally, they acknowledged Saudi Arabia’s commitment to achieving net zero emissions by 2060, highlighting the progress made in renewable energy and energy efficiency.
