Saudi Arabia’s 2022 GDP grows 8.7 per cent, boosted by higher oil prices

Saudi Arabia’s gross domestic product (GDP) expanded by 8.7 per cent in 2022, the highest among G20 countries, as the Gulf state recorded positive growth across all economic activities leading to its first budget surplus in almost a decade.

The kingdom’s statistics authority General Authority for Statistics (GASTAT) attributed GDP growth to a 32.7 per cent growth in crude oil and natural gas activities, a 14.2 per cent increase in government services activities, an 8.6 per cent growth in manufacturing activities except oil refining and restaurants and hotels activity which grew by 8.2 per cent in 2022.

Saudi Arabia’s GDP, crossed the $1tn mark for the first time in 2022, beating its own estimates as higher oil prices boosted government revenues. Global benchmark Brent mostly traded above the $90 mark in 2022 and is expected to remain above $60 this year despite a looming recession.

#الهيئة_العامة_للإحصاء
#الاقتصاد_السعودي_الأعلى_نمو بمقدار 8.7% خلال عام 2022، وينمو في الربع الرابع منه بمعدل 5.5% على أساس سنوي.

للاطلاعhttps://t.co/P62AOvyUMX pic.twitter.com/h41gD0hhzV

— الهيئة العامة للإحصاء (@Stats_Saudi) March 9, 2023

The Gulf state recorded a fiscal surplus in the first three quarters of 2022 but registered a deficit of SAR45.7bn in the last quarter of the year after the authorities slashed oil production by 500,000 barrels per day in November in line with the OPEC+ agreement.

The International Monetary Fund (IMF) said in August 2022 that Saudi Arabia will grow at the fastest pace in a decade as the receding effects of the pandemic, rising oil production/prices and an improving economy have improved the fiscal and external positions.

Read: Saudi Arabia sees 2023 budget surplus bump

The Gulf state approved a $296bn (SAR1.114tn) budget for 2023 and the government expects a surplus of SAR16bn or 0.4 per cent of GDP. Revenues are set to reach SAR1.13tn this year, signalling authorities’ confidence in domestic economic growth and high global energy prices.

Saudi Arabia’s economic diversification

Meanwhile, the current crude oil and gas price outlook is creating an ideal environment for the kingdom to proceed with ambitious reforms under favourable macroeconomic and financing conditions while putting debt on a firm downward path.

Saudi Arabia has undergone a breakneck transformation over the years and the country’s wealth fund Public Investment Fund (PIF) is central to the government’s economic reform initiative as it looks to wean the economy off its heavy reliance on oil revenues as part of Vision 2030.

The IMF said PIF should continue to focus on high returns and greater private sector involvement, including as it continues to implement “giga projects”.

The wealth fund owns stakes in tech companies including ride-hailing firm Uber Technologies, soccer teams including English Premier League’s Newcastle United, electric carmakers Lucid and Ceer and is funding a host of new cities in the desert such as the $500 billion futuristic NEOM City and the Red Sea Development Company’s mega tourism project.

The government is implementing trillions of dollars worth of investments in its non-oil economy sector to drive sustainable growth post-pandemic. Earlier in March, Saudi Arabia launched SAR192bn of investments led by local firms including Aramco, SABIC and Ma’aden under Shareek, a SAR5tn investment initiative that was unveiled by Crown Prince Mohammed bin Salman in 2021.

Read: Aramco, ACWA Power, SABIC to receive support from Saudi’s Shareek programme

ACWA Power will receive support to build the world’s largest green hydrogen plant, Ma’aden will get backing to boost the production of phosphate fertilizers and SABIC will build the country’s first catalyst manufacturing hub. To date, 28 companies are enrolled in the Shareek programme, which is helping eligible companies to accelerate planned projects while identifying new potential partnerships and investment opportunities through government support.