Date: 16 May 2022  Author: Michał Przygoda

Saudi Arabia. 9.6% GDP Growth in Q1 2022

The government of Saudi Arabia (the world’s largest oil exporter) says preliminary estimates indicate that the country’s economy grew by 9.6% in Q1 2022, and if those estimates are confirmed, it will be the highest growth rate since 2011, according to the Saudi General Authority for Statistics (GASTAT).

SOURCE: iStock

It was the oil sector that saw the highest growth in more than a decade at 20.4%, while the other (non-oil) sectors increased by “only” 3.7% and services by 2.4%[1]. Undoubtedly, the reason for this is the rise in oil prices due to Russia’s aggression in Ukraine and the Saudi refusal to increase crude production, as requested by the U.S. and expected to drive the price down.[2] According to the International Monetary Fund, the war in Ukraine and the resulting rise in oil prices is a boon for oil-producing countries like Saudi Arabia, whose GDP is expected to grow by 7.6 percent through 2022. Similarly, Japan’s largest bank MUFG[3] forecasts the Saudi economy to grow by 7.6 percent this year, with GASTAT also reporting growth of 3.2 percent in 2021.[4]

Employment growth is also observed. According to Jadwa Investment, “The recovery in the labor market during 2021 was associated with a significant rebound in the kingdom’s non-oil economy. With robust levels of non-oil activities growth anticipated in 2022, we expect further rises in the number of Saudi and expat workers in many sectors.”[5]

Saudi Arabia’s inflation rate rose to 2% (March 2022 data) year-on-year from 1.6% in the previous month, in line with market expectations. The increase was driven by higher prices of transport (4.7%), especially gasoline (14.7%) and new cars (4.0%); and food and beverages (3.0%), including food (3.3%), meat (2.4%) and vegetables (9.4%). The prices of personal goods and services also increased (2.9%), such as jewelry, clocks and watches (5.6%); education (6.3%), due to high school fees (19.8%); and restaurants and hotels (2.9%) including food services (2.4%). The prices of housing, water, electricity, gas, and other fuels also increased by 0.2% as a result of a 0.2% increase in housing rents. In contrast, the prices of clothing and footwear (-1.2%) declined due to clothing (-0. 6%) and tobacco (-0.3%) due to cigarettes (-0.7%). [6]

The recovery was also indicated much earlier by the trade surplus, which rose to SAR 60.1 billion (Saudi rial) in February 2022 – the largest surplus since December 2016. Exports increased by 64.7% year-on-year to SAR 108.4 billion. Saudi Arabia’s largest export partners are China, followed by India and Japan. Imports, on the other hand, increased by 18.2% y-o-y to SAR 48.3 billion, mainly due to purchases of chemical or allied industries and mineral products, with the main import partners being China, the US and the UAE.[7] The long-unreported GDP growth also comes on the back of the largest increase since 1973 in industrial output rising 22.3% y-o-y in February 2022 primarily due to faster growth in mining and quarrying output (25.5% vs. 11.4% in January) as the country increased oil production to its highest level of over 10 million barrels per day in February.[8]

All of the above results in an unprecedented rise in the share price of the Saudi Arabia Stock Exchange (TASI) since 2006. Its index has risen by as much as 2452[9] points (21.74%) since the beginning of 2022, which undoubtedly provides an opportunity for investors to multiply their wealth.

[1] Saudi Arabia’s GDP grows by 9.6% in Q1 2022; achieves highest rate since 2011. https://www.zawya.com/en/economy/gcc/saudi-arabias-gdp-grows-by-96-in-q1-2022-achieves-highest-rate-since-2011-v9tts0k9 [Retrieved: May 03, 2022].

[2] Oil propels Saudi GDP growth to near 10 percent in first quarter. https://www.aljazeera.com/economy/2022/5/1/oil-propels-saudi-gdp-growth-to-near-10-percent-in-first-quarter [Retrieved: May 03, 2022]

[3] Saudi Arabia posts highest Q1 economic growth in a decade at 9.6%. https://www.thenationalnews.com/business/economy/2022/05/02/saudi-arabia-posts-highest-q1-economic-growth-in-a-decade-at-96/ [Retrieved: May 03, 2022].

[4] Saudi Arabia’s GDP grows 9.6 per cent in Q1 2022. https://gulfbusiness.com/saudi-arabias-gdp-grows-9-6-per-cent-in-q1-2022/ [Retrieved: May 03, 2022].

[5] Saudi Arabia posts….

[6] Saudi Arabia Inflation Rate. https://tradingeconomics.com/saudi-arabia/inflation-cpi [Retrieved: May 03, 2022]

[7] Saudi Arabia Balance of Trade. https://tradingeconomics.com/saudi-arabia/balance-of-trade [Retrieved: May 04, 2022].

[8] Saudi Arabia Industrial Production. https://tradingeconomics.com/saudi-arabia/industrial-production [Retrieved: May 04, 2022].

[9] Saudi Arabia Stock Market (TASI). https://tradingeconomics.com/saudi-arabia/stock-market [Retrieved: May 04, 2022].

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