The Saudi non-oil gross domestic product (GDP) is expected to grow around 2.6 percent in 2019, compared to 2.2 percent last year, according to Samba Financial Group’s July Economic Analysis report.
The Saudi economy witnessed great progress in the previous period pushed by the growing impact of the government's spending and the potential decline in the interest rate in addition to the positive indicators registered by the balance of the payments during Q1 of 2019.
In Q1, the Kingdom’s economic growth dropped to 1.7 percent, compared to 3.6 percent in Q4 of 2018 due to the drop in oil output. Despite that, growth of the non-oil economy reached 2.1 percent by the end of March, from 1.8 percent in Q4 of 2018.
In its report, Samba pointed to the noticeable improvement in the balance of payments in the first quarter of this year, leading to an accumulation of $3 billion of reserve assets, down from $10.6 billion outperformed in the first quarter of 2018.
The current account is reported to show a surplus of $11.5 billion, an increase of 25 percent over the previous year.
“Although the Kingdom's trade surplus did not change, the positive change in balance of payments gains in the first quarter of this year was due to oil production, which replaced the price weakness of last year. With the slight increase in import spending, the current account mainly supported the decline in remittances of expatriate workers, which decreased by approximately 1 billion in the first quarter compared to the same quarter last year,” added the report.
Based on first-quarter data, Samba is optimistic about its financial footprint as UK investment opportunities increase and financial balance sheet indicators – excluding currency reserves – have dropped to a record $8 billion, down from $27 billion in Q4 of 2018.
The report noted the remarkable development of the financial balance sheet on the positive change in private discharge flows and foreign inflows in the first quarter of this year compared to 2017 and 2018. Although there are still large outflows, much of this has been achieved either as direct foreign investment or through the acquisition of debt and equity.
In the report, Samba observes the positive development of most sectors of the economy and supports its optimistic estimate of growth of non-oil GDP. With the exception of the petrochemicals sector, all key non-oil related economic factors such as public services, finance, wholesale and retail achieved gains.
As far as the construction sector is concerned, the report shows that for the first time since 2015, the sector has experienced annual growth in the first quarter.
Regarding the unemployment rate among Saudis, employment data for the first quarter shows a decline to 12.5 percent compared to 12.7 percent in the fourth quarter of 2018. While Saudis’ real wages in the public sector rose slightly.
