Saudi Economy Grows by 8.8% in Third Quarter

Saudi Minister of Finance speaks during the Budget 2023 Forum on Sunday in Riyadh (Photo: Saleh Al-Ghannam)
Saudi Minister of Finance speaks during the Budget 2023 Forum on Sunday in Riyadh (Photo: Saleh Al-Ghannam)
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Saudi Economy Grows by 8.8% in Third Quarter

Saudi Minister of Finance speaks during the Budget 2023 Forum on Sunday in Riyadh (Photo: Saleh Al-Ghannam)
Saudi Minister of Finance speaks during the Budget 2023 Forum on Sunday in Riyadh (Photo: Saleh Al-Ghannam)

The General Authority for Statistics announced on Sunday that Saudi Arabia’s economy grew by 8.8 percent in the third quarter of 2022.

This growth was driven by the rise of oil-related activity by 14.2 percent, and non-oil activities by 6 percent, while government activities recorded a growth of 2.5 percent on an annual basis.

In the quarterly comparison, the seasonally adjusted real GDP grew by 2.1 percent on a quarterly basis, as oil activities grew by 4.5 percent, government activities by 1.5 percent, while non-oil activities decreased by 0.5 percent, on a quarterly basis.

The General Authority for Statistics noted that GDP at current prices amounted to 1.036 trillion riyals ($275.53 billion) in the third quarter, with crude petroleum and natural gas activities contributing 35.2 percent, followed by government service activities, at a rate of 14.1 percent, then manufacturing activities, with the exception of oil refining, with a contribution of 7.8 percent.

In this context, Saudi Finance Minister Mohammad Al-Jadaan said that non-oil revenues contributed to covering 40 percent of the volume of government expenditures until the end of 2021, thanks to the new fiscal policy that seeks to curb dependence on volatile oil revenues.

Speaking during the Budget 2023 Forum, which kicked off on Sunday in Riyadh, the minister said: “There were great challenges, as the deficit 5 years ago amounted to 15 percent of the budget’s financial domestic product.”

“We had to withdraw SR1 trillion from reserves, and borrow an additional SR1 trillion from the markets, to cover the deficit,” he noted

He added that Saudi Arabia has achieved the goal of the Fiscal Balance Program, which is considered one of the most important economic reform programs within Vision 2030.

“Let us now move to the Financial Sustainability Program, which is based on financial planning, whether in terms of revenues or expenditures, for a period of three years, and in some sectors for ten years,” he said.

According to the minister, work achieved during the past years helped improve services and raise their efficiency.

He stressed that Saudi Arabia took proactive steps to set a ceiling on energy prices, while Saudi Aramco was supported with tens of billions to avoid exporting inflation to the Saudi economy.

According to Al-Jadaan, the government has pumped 20 billion riyals ($5.3 billion) to provide support for beneficiaries of social security, the Citizen Account, and livestock breeders, stressing that abundance was more important than rising prices during the inflation stage.

The Saudi minister underlined the need to empower the private sector, by promoting structural reforms and changing regulations, as well as providing a legislative environment that contributes to the development of the sector.

For his part, Faisal Al-Ibrahim, Minister of Economy and Planning, explained that the Saudi budget supported the implementation and achievement of Vision 2030. He stressed that one of the factors of success was long-term economic planning, coupled with the adequate financial strategies.

Al-Ibrahim touched on the role of development funds, which he said contributed to economic mobility and diversification and empowered the private sector.

The Minister of Economy and Planning added that the private sector was the government’s first strategic partner, and the most important axis in diversifying the sources of growth.

He explained that the private sector’s contribution to the Kingdom has now reached 43 percent, with the target of 65 percent by the end of 2030.

In a dialogue session entitled, “The Impact of Enabling Investment on Economic Growth,” Eng. Khaled Al-Falih, Minister of Investment, stated that the Saudi economy, despite the various world challenges, has achieved the highest growth among the Group of Twenty, reaching 10.3 percent in the first three quarters of the year.

He noted that the global economic total debt rate was increasing and exceeded 100 percent in many leading economies, while the Kingdom’s debt rate registered a decline of 25 percent.



Dollar Steadies ahead of Trump Inauguration

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
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Dollar Steadies ahead of Trump Inauguration

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo

The US dollar steadied on Thursday despite the sharp fall in US bond yields after Wednesday’s inflation data as market focus shifted to Donald Trump’s presidential inauguration next week and possible inflationary impact of his policies.

Meanwhile the yen rose against the dollar and the euro as investors expected the Bank of Japan to hike rates next week.

The US dollar index - a measure of the value of the greenback relative to a basket of foreign currencies - was up 0.1% at 109.12.

"Markets are cautious before the inauguration because there is still policy uncertainty," said Paul Mackel, global head of foreign exchange research at HSBC.

"If the risk of US tariffs begins to materialize, the dollar will get another lift," he added, Reuters reported.

The highlight of the day should be the nomination hearing of Trump's choice of Scott Bessent to head the Treasury Department.

Bessent, who will face questioning before the US Senate Finance Committee, is expected to keep a leash on US deficits and to use tariffs as a negotiating tool, mitigating the expected inflationary impact of economic policies expected from the Trump administration.

The US inflation curve "has a well-identifiable 40 bps 'hump' over the next 12 months, which is near-identical to the estimated impact of a 5% universal and 20% China tariff starting as soon as Trump gets in office," said George Saravelos, head of forex research at Deutsche Bank.

"The market is pricing quick but moderate tariffs," he added. "We see risks of slower but bigger tariffs."

Traders who have been growing more worried about inflation responded with relief to Wednesday's US data, buying stocks and sending benchmark 10-year Treasury yields down more than 13 basis points. The currency reaction was more muted.

Analysts flagged that the US consumer price data was better than expected, but still showing inflation above Federal Reserve targets. The figures provided the US bond market with an excuse to do some downside testing for yields, but such a move is unlikely to go far.

"We still think that it will be easy for the Fed to remain on hold for now and wait for more data and fiscal policy clarity," said Allison Boxer, an economist at PIMCO, adding that US data did not change their forecasts for core inflation.

"We expect this to be the message (Fed) Chair (Jerome) Powell aims to communicate at the January meeting."

There was little direct reaction in foreign exchange markets to the ceasefire deal in Gaza, though the Israeli shekel did touch a one-month high on Wednesday.

The yen rose 0.46% against the dollar, after hitting 155.21, its lowest level since Dec. 19. It was up 0.51% against the euro at 160.19.

Recent remarks from Bank of Japan Governor Kazuo Ueda and his deputy Ryozo Himino have made clear that a hike will at least be discussed at next week's policy meeting and markets see about a 79% chance of a 25 basis point increase, while pricing 50 bps of rate hikes by year-end.

"Yen strengthened on expectations for a rate hike, but now the focus is on what BOJ officials will say about the monetary policy outlook," HSBC's Mackel argued.

"They could signal a more gradual path for the future, which could limit yen gains."

Japan's annual wholesale inflation held steady at 3.8% in December on stubbornly high food costs, data showed on Thursday.

"Expectations of a BOJ hike and perhaps fears of more forex intervention in the 158/160 area have helped the yen outperform," said Chris Turner, head of forex strategy at ING.

"We expect that to continue into next week's BOJ meeting. However, dips may exhaust in the 153/155 area," he said.

The euro was up 0.05% at $1.0294.

Sterling dropped sharply against the yen and also weakened versus the dollar and the euro on Thursday as investors focused on monetary policy divergence after last week's selloff in gilts and the pound.

China's yuan, seen on the front lines of tariff risk, was pinned near the weak end of its trading band at 7.3468 throughout the Asia session.