Saudi Arabia’s economy grew at its slowest rate in more than three years between April and June, government data showed yesterday, and some analysts said the figures might be understating the extent of the blow from low oil prices.
Growth has been weakening since early 2015 as cheap oil slashes state revenues and pushes the government into spending cuts, which are weighing on the private sector and consumer spending.
Gross domestic product, adjusted for inflation, rose 1.4% from a year earlier in the second quarter of 2016, after growth of 1.5% in the first quarter.
It was the slowest growth since 0.3% in the first quarter of 2013.
The oil sector expanded 1.6% from a year ago, slowing from 5.1% growth, while the non-oil sector grew 0.4%, recovering from a fall of 0.7% in the previous quarter.
The private sector grew just 0.1% in the second quarter.
The figures suggested the Saudi economy was faring better in the face of oil’s slump than many people feared.
Nevertheless, analysts said Saudi data could be erratic – growth for the fourth quarter of 2015 was ultimately revised down to 1.8% from an original estimate of 3.6% – and said there could be a similar revision in this case.
“There’s a good chance that the figures will be revised down,” said Jason Tuvey, Middle East economist at London-based Capital
Economics.
Other indicators such as imports suggested the non-oil private sector may have slowed further than the government data showed, he said.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said she had expected some improvement in the second quarter but that the non-oil sector’s positive growth was
surprising. She also said second-quarter data for the non-oil sector might eventually be revised lower. In any case, she said, the economy would remain under pressure from austerity policies for the rest of this year.
The non-oil sector looks set to contract for 2016 as a whole, she said. This week, the cabinet announced it was cutting bonuses and other financial perks for public sector workers; since such allowances account for as much as 30% of many Saudis’ income, the policy may have a significant impact on consumer spending and saddle banks with more non-performing consumer loans.