Saudi Arabia’s non-oil private sector’s GDP rose 4.3 percent during the third quarter of 2019, confirming the success of the Kingdom's policy of pushing private economic activity towards reducing dependence on oil and shifting to multiple economic resources.
Saudi Arabia’s economy contracted by 0.46 percent in the third quarter from a year earlier, hit by a drop in oil output as the Organization of Petroleum Exporting Countries (OPEC) cut production, according to the Saudi General Authority for Statistics (GSTAT).
Oil sector output declined 6.43 percent, but non-oil output grew 4.33 percent, led by private sector activity, and according to a seasonally adjusted basis, the economy contracted by 0.19 percent in the third quarter on a quarterly basis.
This comes at a time when the Saudi government in its budget cut its forecast for economic growth to 0.4 percent in 2019 from 0.9 percent with growth hit by lower oil prices and crude production cuts agreed by OPEC nations and producers outside the exporting group.
OPEC and allied oil producers, called OPEC+, have agreed to deepen their output cuts by 500,000 barrels per day (bpd) until March 2020, which could weigh on the Saudi economic recovery in early 2020, especially that the government expects real GDP growth at 2.3 percent in 2020.
In detail, the data showed that the mining and quarrying sector, which accounts for 38.2 percent of GDP, saw the biggest decline at 6.39 percent fueled by a 6.52 percent drop in crude petroleum and natural gas output.
The output of the oil and refining sector decreased by 6.1 percent, which led to a decline in the manufacturing output. Manufacturing accounts for 12 percent of GDP on a constant basis.
Growth in the third quarter came from the wholesale and retail trade, which increased 8 percent, while the financial, insurance, real estate and business services sector grew 6.28 percent.
Experts had on many occasions stressed that Saudi investments in non-oil projects led by the Public Investment Fund (PIF) will lead economic activity in 2020, as part of the economic diversification plan sponsored by Crown Prince Mohammed bin Salman, Deputy Prime Minister and Minister of Defense.
The proceeds of selling the 1.5 percent share of Aramco to non-oil sectors will be reinvested in an effort to reduce dependence on oil revenues.
Moreover, construction is scheduled to start on the first major parts of the Qiddiya Entertainment City project and Diriyah Gate at the beginning of 2020, and the Red Sea tourism project is also expected to start full-scale construction next year.