Saudi Arabia’s real gross domestic product increased 1.3% in 2024, preliminary government data released on Thursday showed.
The growth marks a return to economic expansion after the previous year and was primarily driven by non-oil sector activities, Reuters reported.
While the GDP experienced moderate growth, the non-oil sectors surged ahead with a substantial increase of 4.3%.
The General Authority for Statistics reported that GDP reached its highest quarterly growth rate in two years, surging 4.4% in the fourth quarter compared to the same period a year earlier.
Robust non-oil activity
Non-oil activity also showed strong growth, increasing by 4.6%, according to the report.
In 2024, the non-oil sectors of the economy exhibited remarkable growth, significantly surpassing the overall GDP growth.
This robust performance was in stark contrast to the oil sector, which faced a decline of 4.5%.
Government activities also contributed to the overall economic expansion, albeit at a more modest rate of 2.6%.
These figures highlight the dynamism and resilience of the non-oil sectors, which served as a crucial engine of growth for the economy in 2024.
Saudi Arabia has a target of diversifying its economy and reducing its reliance on revenues from oil exports in the coming years.
The Saudi Arabian economy, heavily reliant on oil exports, experienced a contraction of 0.8% in 2023.
Oil production cuts take toll
This decline was primarily attributed to a combination of factors, most notably the production cuts implemented by the Saudi government and the concurrent decrease in global oil prices.
As the world’s largest exporter of crude oil, Saudi Arabia’s economic performance is closely tied to the dynamics of the global oil market.
The production cuts, aimed at stabilizing oil prices amidst fluctuating global demand, had the unintended consequence of reducing export volumes and, consequently, impacting the country’s overall economic growth.
The lower oil prices further exacerbated the situation, as they directly translated to reduced revenues from oil exports, which form a substantial portion of the Saudi economy.
OPEC+ member states, led by Saudi Arabia, have implemented extended cuts to oil production. These cuts have had a substantial impact on the kingdom’s economy, notably hindering GDP growth.
The reduction in oil output has resulted in decreased revenue for the Saudi government, which heavily relies on oil exports. This decline in revenue has had a ripple effect across various sectors, including construction, manufacturing, and services, leading to slower economic growth.
Additionally, the oil production cuts have contributed to a decline in foreign investment in Saudi Arabia, further impacting economic development.
While these production cuts aim to stabilize oil prices and support the global oil market, they have come at a significant cost to the Saudi Arabian economy.
Meanwhile, oil prices have also struggled to stay above the $80 per barrel mark over the last one year despite steep production cuts by major producers.
Saudi Arabia and other Middle Eastern countries want Brent oil prices above the crucial breakeven mark of $80 a barrel.
IMF lowers GDP forecast
The International Monetary Fund (IMF) has lowered its 2025 GDP growth forecast for Saudi Arabia to 3.3% due to extended oil production cuts. The 2026 forecast was also trimmed, according to Reuters.
The Gulf state’s 2024 growth was projected to be 1.4%, exceeding the Saudi government’s own 0.8% estimate.
Saudi Arabian Finance Minister Mohammed al Jadaan said during the World Economic Forum in Davos earlier this month:
We need to be careful when we look at GDP as a measure for growth, because you need to look at other indicators. The total GDP number doesn’t really matter. Our focus is really the non-oil GDP and non-oil GDP has been growing very healthily over the last few years; we are likely to see that growth escalating in the medium term.”
Additionally, the kingdom has tight deadlines to deliver on massive infrastructure projects to achieve its economic transformation objectives.
These objectives are intended to diversify the economy away from hydrocarbon income, especially with the kingdom hosting major global sporting events in the coming decade.
The government has projected a fiscal deficit of $27 billion for 2025. It anticipates that the deficit will be approximately 3% of GDP over the coming years due to increased spending and investments in domestic projects, Reuters reported.
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