Saudi Arabia - Saudi Arabian economy has started to recover in the first quarter of 2018 (Q1) after contracting for four solid quarters, supported by the growth in the non-oil sector and driven by manufacturing, government, and financial services. The increasing oil prices also aided the economic expansion in Q1.

Nonetheless, the activity in the construction sector continued to decrease in Q1, shining a light on persistent pressure on builders as most government spending has been directed towards new services like the Citizen Account Programme, salaries etc. Furthermore, the “Wholesale & Retail Trade, Restaurants & Hotels” sector drew together in Q1 2018, mainly due to consumers’ hesitation to spend on non-essentials following the implementation of VAT and exit of a large number of foreign workers post the introduction of dependent fees.

Simultaneously, recent economic indicators occur to be balanced with Saudi Arabian Monetary Authority (SAMA) data indicating that foreign reserves (+1.1% y-o-y; -0.4% m-o-m) are witnessing an annual increase for the second continuous month in May on account of recent debt issuances by the government.

Subsequently, credit to the private sector (+0.4% y-o-y; principally unchanged on a monthly basis) advanced to escalate on a yearly basis for the second consecutive month in May, although deposits (-0.3% y-o-y; -0.6% m-o-m) registered an annual drop.

Furthermore, deposits by Saudi nationals skidded (-16.7% y-o-y) for the first time in eight months in May. Additionally, Saudi Arabia’s current account balance recorded a surplus ($11 billion) in Q1 2018, sponsored by higher exports.

Meanwhile, the Saudi unemployment rate edged up slightly to 12.9% in Q1 2018 (12.8% in Q4 2017), whereas the Saudi labor force participation rate remained steady at 41.9 percent during the same quarter.

Altogether, the economic recovery will continue to speed up in 2018, led by higher oil production among firm oil prices coupled with improvement in the non-oil sector.

Recovery in the private sector (+1.1% y-o-y in Q1 2018 Vs +0.4% y-o-y in Q4 2017) predict improvement and development for the economy, on which the government has pinned its hope to create additional jobs and improve the unemployment rate among Saudi nationals.

 

Source: Trade News