World Economy

Saudi Growth to Remain Slow

Growth in the non-oil private sector will accelerate from  25-year lows.Growth in the non-oil private sector will accelerate from  25-year lows.

Saudi Arabia’s economy is forecast to continue slowing this year, dragged down by negative growth in the oil sector, according to Jadwa Investment.

Its latest report said growth in the oil sector will turn negative due to the kingdom’s compliance with OPEC production cuts, while non-oil sector growth should rebound but “remain subdued” during 2017, Arabian Business reported.

Jadwa forecast that growth in the non-oil private sector will accelerate from 25-year lows with non-oil mining and ownership of homes likely to be the fastest growing sectors. It added that growth in wholesale and retail and construction will turn positive following a recession in 2016.

Jadwa said that the combination of a rebound in oil revenue as a result of higher oil prices, rising non-oil revenue, and improving efficiency in expenditure will result in the fiscal deficit falling to single digits in 2017.

The current account deficit will also shrink considerably, boosted by a rise in oil export revenue, it noted.

“The main risks to our forecast stems from the external environment, specifically, any delays in the implementing reforms in the most growth-enhancing areas of the National Transformation Program,” the report said.

Jadwa added that the partial impact of fiscal balancing measures will be offset by the government’s focus on restructuring the private sector support mechanism.

 Heading Toward Deflation

Figures released by the Saudi General Authority for Statistics show that month-on-month, in January, the cost of living index in Saudi Arabia recorded a decrease of 0.2% compared with the month of December 2016. Compared to year-ago levels, prices were down by 0.4%.

The data for January marks the first time in more than 10 years that Saudi Arabia has seen consumer price deflation, reflecting the slowing of the country’s economy last year in reaction to lower oil prices. It also demonstrates the impact of the strength of the dollar on the Saudi riyal and its peg to the US currency.

However, deflation is expected to be a short-lived phenomenon, with tax increases on the likes of fuel and tobacco in the pipeline.

The GAS has been publishing consumer prices and index data in Saudi Arabia for more than 50 years. Data is collected from 16 major cities of which 13 represent the centers of the country’s administrative regions (Riyadh, Makkah, Madinah, Buraydah, Dammam, Abha, Tabuk, Hail, Arar, Jazan, Najran, Baha, Sakaka) and three others, namely, Jeddah, Taif, and Hofuf.

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