Saudi Arabia’s economy expanded at an annual rate of 3.1 per cent in the third quarter, only half as fast as it grew a year ago, according to data released on Wednesday.
The annual inflation-adjusted growth rate slowed to 2.1 per cent during the first quarter in Saudi Arabia, the world’s top oil producer. The growth rate rose to 2.7 per cent in the second quarter, according to the Central Statistics Office, and continued to rise as output increased in the third quarter.
“Oil is the one pushing the headline numbers, but there is an evident moderation in the non-oil sector,” said John Sfakianakis, chief investment strategist at Masic, a Saudi investment company.
The $711 billion Saudi economy, which has been pegging its currency, the riyal, to the U.S. dollar for decades, grew 5.7 per cent year-on-year in the third quarter of 2012 and 5.1 per cent in all of last year.
Quarter-on-quarter, Saudi real GDP grew 1.1 per cent in July-September 2013, reversing the same decline in the previous quarter, according to a Reuters calculation based on the official data.
Performance of the top Arab economy is closely linked to energy prices, crude oil output and government spending, which has been growing strongly in the past years, partly to address social tensions stemming from unrest in the Middle East.
Growth in the oil sector, which accounts for nearly half of the economy, was 3.1 per cent year-on-year in July-September, after a 3.7 per cent drop in the second quarter.
However, growth in the Saudi non-oil private sector eased to 3.3 per cent in the third quarter from 4.2 per cent in April-June and 4.3 per cent a year earlier.
“The figures reflect the high level of spending in 2012. There was also a degree of disruption caused by labour market policies in the third quarter of this year,” said Paul Gamble, director, sovereign group at Fitch Ratings in London.
Around a million foreign workers have left Saudi Arabia this year after a crackdown on visa irregularities, which accompanied labour reforms aimed at putting more Saudi nationals into jobs held by expatriates. Today’s data showed a slowdown in some sectors that depend on cheap imported labour, Sfakianakis said.
Growth in transport and storage slowed to 3.2 per cent from 6.8 per cent a year earlier. In the wholesale, retail, hotels and restaurants sector, growth slowed to 2.7 per cent from 7.1 per cent a year ago.
Not all sectors that rely on cheap labour slowed.
Construction grew 5.7 per cent in the third quarter, well above 4.9 per cent a year earlier.
Growth in non-oil business activity quickened in November, a purchasing managers survey showed earlier on Wednesday, but the rate remained slower than the average.
Analysts polled by Reuters in September forecast economic growth in the desert kingdom would slow to 4.2 per cent in 2013 from 5.1 per cent last year.