Abu Dhabi (Reuters) Saudi Arabia’s economy is expected to pick up in 2019, but a global economic slowdown and its potential impact on the global oil market could impact growth, the Kingdom’s central bank said.
Saudi Arabia’s economy grew by 2.2 per cent in 2018, driven by the oil sector, compared to a decline of 0.7 per cent in 2017, the Saudi Arabian Monetary Authority (SAMA) said in a report. The main risk for the Saudi economy comes from its exposure to the global oil market. The oil sector accounts for some 45 per cent of Saudi GDP and more than 63 per cent of government revenue.
There have been recent signs of slowing global growth, which could indirectly impact the Saudi economy, the report warned. Continued structural reforms will likely place some pressure on economic growth in the short-term, it added, without giving a forecast for 2019.
For the non-oil sector, growth is expected to be stimulated by expansionary fiscal policy as the budget for 2019 shows a significant increase in capital expenditure by 245 billion Saudi riyals ($65.3 billion), the report said. Saudi Arabia’s non-oil sector saw modest growth of 1.7 per cent in 2018 versus 1 per cent in the previous year, SAMA said.
The country’s estimated budget deficit was 136 billion Saudi riyals or 4.6 per cent of GDP in 2018 compared to the 9.3 per cent deficit in the previous year. Government revenues grew to 895 billion riyals in 2018, up 30 per cent over the previous year, it added.
Non-oil revenues totalled 287 billion riyals, a rise of 90 per cent on the previous year, with more than half coming from tax revenues, while government expenditure rose by 11 per cent to 1 trillion riyals in 2018.
Consensus is for growth to repeat 2% plus this year
In April the International Monetary Fund (IMF) estimated that Saudi economic growth in 2019 may be slightly higher than its earlier 1.8 per cent forecast due to the faster expansion of the non-oil sector compared to the wider economy The Saudi central bank governor told Reuters in April that Saudi economic growth in 2019 would be “no less than 2 per cent”.