Saudi Arabia’s non-oil economy – the engine of job creation – rebounded in the first quarter to pre-pandemic levels, even as the overall economy was dragged into contraction by oil-production cuts.
The non-oil sector grew 3.3% from a year earlier, the strongest since 2019, according to preliminary estimates released on Monday by the kingdom’s General Authority for Statistics. Final figures are scheduled to be released in June.
Business in the world’s largest crude exporter is gradually returning to normal after the twin crisis caused by oil-market turmoil and coronavirus-related lockdowns. Consumer spending is rebounding and officials plan to partially reopen the kingdom’s borders on May 17. The International Monetary Fund expects the economy to grow 2.1% this year after shrinking 4.1% in 2020.
“The numbers suggest that the non-oil economy has already fully recovered from the adverse impact of the pandemic in Q2 2020, despite lingering Covid-related restrictions on internal mobility and international travel,” Farouk Soussa, Middle East and North Africa economist at Goldman Sachs Group Inc, said in a research note.
Business activity in neighbouring Dubai is also rebounding strongly, recent data show.
The oil sector shrank 12%, the most in at least a decade, according to data compiled by Bloomberg, leading the broader economy to shrink 3.3%.
The large contraction in Saudi Arabia’s oil GDP came after Opec and its allies embarked on deep production cuts in May 2020 to steady crude prices. Saudi oil output fell to 8.15mn barrels a day in the first quarter, from an average of almost 10mn barrels a day a year earlier.
The price of Brent crude has gradually risen to nearly $70 a barrel after hitting a low of less than $20 last year. Brent averaged $61.30 in the first quarter of 2021, compared with $50.57 a year earlier.