Saudi GDP growth continues on back of high oil prices

Saudi Arabia’s economy is continuing to post strong numbers. 

The Saudi General Authority for Statistics reported Thursday that the kingdom’s gross domestic product increase 8.8% in the third quarter of 2022 compared to the same period last year. GDP also increased 2.2% from the second quarter of 2022. 

Both the oil and non-oil economies grew in the third quarter, with oil activities increasing 14.2% over last year. Non-oil activities went up 6%, according to the authority. 

Why it matters: Saudi Arabia’s GDP has been increasing significantly in recent years, and grew 8.3% in 2021, which was higher than the world’s collective GDP growth rate of 6.1%. The Saudi GDP grew 12.2% in the second quarter of 2022 compared to the same quarter in 2021, the biggest yearly increase since 2011. 

The New York-based credit rating agency S&P predicted in September that Saudi GDP will grow by 7.5% in 2022. 

Oil prices have been high throughout the year due to the market chaos resulting from the Russian invasion of Ukraine as well as oil producers in the Saudi-led OPEC+ alliance cutting oil production. The high prices are benefitting the Saudi economy, according to S&P, which reported in September, “High global oil prices and increased oil production alongside stronger non-oil economic growth are supporting Saudi Arabia's fiscal and external metrics.” 

Oil prices remain relatively high, but the price of Brent crude oil fell last week to its lowest point since January. One analyst told Al-Monitor that the price decrease could be worrisome for Saudi Arabia’s investment plans. 

Know more: Saudi Arabia wants to increase the share of non-oil sectors in its GDP. The kingdom launched its Vision 2030 economic diversification plan in 2016 in an effort to reduce economic dependence on oil. Saudi Arabia has announced numerous new projects per the initiative, most recently a renewable energy-powered airport in Riyadh and the Ceer electric vehicle company. Many of Vision 2030’s projects, including the controversial NEOM megacity, are in the early stages of development. 

Vision 2030 has had some success so far. More artificial intelligence and fintech companies are operating in Saudi Arabia than before, for example. 

Some observers have criticized Vision 2030 for relying too heavily on megaprojects like NEOM. Saudi Arabia has not finished similar projects in the past, 

“Saudi Arabia already has a history of abandoned megaprojects that primarily serve as just another grave for billions of infrastructure investments,” read a 2021 report from The Washington Institute of Near East Policy. 

The report noted the 2006 Economic Eities Program, which was meant to house 4.5 million inhabitants by 2020. The program’s King Abdullah Economic City had only 4,000 inhabitants by 2021, however.