Dubai: Saudi Arabia’s economic growth fell to its lowest level in more than a year in the fourth quarter of 2014, a sign that the plunge in oil prices may be causing growth to slow, data from the state statistics office showed on Wednesday.
Gross domestic product, adjusted for inflation, expanded 2.0 per cent from a year earlier last quarter, down from 2.4 per cent in the third quarter and 4.9 per cent in the final quarter of 2013. For all of 2014, GDP grew 3.6 per cent.
The statistics office changed the base year for its calculations to 2010 from 1999 previously, making it impossible to compare growth rates further back in time.
The oil price slide has slashed Saudi Arabia’s state revenues but will not affect GDP growth directly unless the volume of oil output changes. Saudi crude oil output has edged down only slightly in recent months, to 9.62 million barrels per day in December from 9.85 million bpd last June, according to a Reuters survey.
GDP in the oil sector shrank 2.3 per cent year-on-year in the third quarter of 2014 but was flat in the fourth quarter. Growth of non-oil GDP slowed sharply, however, to 3.7 per cent from 6.4 per cent.
Jason Tuvey, Middle East economist at London-based Capital Economics, said non-oil GDP may have been hit by the Saudi government easing off on spending as oil revenues declined, and by a moderately negative impact on consumer sentiment from lower oil prices in the world’s top oil exporter.
However, the government’s 2015 budget projects a slight rise of state spending in nominal terms, and Riyadh has huge fiscal reserves which it can use to stimulate the economy. So analysts do not expect any further, sharp slowdown in GDP growth.
“There are no signs of a collapse in output,” Tuvey said, adding that he expected GDP to grow around 2 per cent in 2015.