Saudi GDP grows 8.7% in 2022 due to oil, non-oil growth

Saudi Arabia posted strong gross domestic product (GDP) numbers on Tuesday. 

The Saudi General Authority for Statistics reported that the Saudi GDP grew by 8.7% in 2022 and 5.4% in the fourth quarter of the year. Saudi Arabia’s oil and non-oil sectors both contributed to the growth. Oil-related activities increased by 6.1%, and non-oil activities grew 6.2% throughout the year, the authority said in a press release. 

Why it matters: Saudi Arabia’s GDP is increasing relatively fast compared to some other economies in the region. Egypt’s GDP increased 4.4% during the first quarter of fiscal year 2022-23, the government reported in November. Qatar’s Planning and Statistics Authority said GDP increased 4.3% year-on-year during the third quarter of 2022. 

The United Arab Emirates’ GDP is closer to Saudi Arabia’s. The UAE said in December that they expect 6.5% growth in 2022, Reuters reported. 

The strong non-oil growth bodes well for Saudi Arabia's economic diversification plans. Most recently, Saudi Crown Prince Mohammed bin Salman launched an events investment fund targeting sports, entertainment and other sectors. 

Saudi Arabia’s high GDP growth rate is not new. The kingdom’s GDP grew 8.3% in 2021 and 8.8% in the third quarter of 2022. 

Saudi Arabia's GDP was abetted by high oil prices throughout 2022. 

A high GDP is not necessarily a good thing in all cases. Many economists believe higher GDP can ultimately lead to more inflation. 

Relatedly, the Saudi Central Bank raised interest rates several times last year. These decisions mirrored the US Federal Reserve’s rate hikes targeting inflation. 

What’s next: The New York-based credit-rating agency Fitch said in a recent report that they expect Saudi Arabia's GDP growth rate to slow down to 3.3% this year, predicting less growth tied to oil production. 

“Easing oil production growth, lower government spending, tighter monetary policy and base effect will cause headline growth to ease, with only investment activity remaining above-trend,” read the Fitch report. 

The relatively lower growth rate in the fourth quarter of 2022 is in line with Fitch’s analysis. 

Saudi Arabia, Russia and other members of the so-called OPEC+ alliance will meet Wednesday to decide what to do about their current oil production levels.