Growth Contraction Slowing Saudi Reforms

Slowing economic growth in Saudi Arabia is expected to challenge the pace of fiscal reforms as the real GDP of the country contracted in the first quarter of the year led by the oil sector, Arabian Business reported. The impact of the OPEC production cuts made in January was visible in Saudi Arabia’s first quarter GDP data with the headline GDP growth contracting by 0.5% year on year, down from growth of 1.2% in the fourth quarter. This contraction was due to the oil sector, which fell by 2.3% year on year in real terms, as Saudi Arabia cut production. This was the first fall in Saudi Arabia’s GDP growth since 2009, which was also led by a fall in oil output as global demand dropped. “We expect the oil sector to remain a drag on real headline GDP growth for the remainder of 2017, with the oil production cut being extended to the second half of 2017. We foresee real GDP growth contracting by 0.4% in 2017 on lower oil production,” said Monica Malik, Chief Economist of Abu Dhabi Commercial Bank.