Drop in oil prices, production hinders Saudi Arabia's economy
3 Min Read
The oil production cuts have pushed the Kingdom from one of the fastest-growing G20 members to one of the slowest.
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Figures issued by the General Authority for Statistics show that Saudi GDP increased 1.1% year on year. (AP)
Saudi Arabia's economy stagnated in the second quarter as oil output cuts and price drops pulled the kingdom from one of the Group of 20's fastest-growing to one of the slowest.
Figures issued by the General Authority for Statistics show that GDP increased 1.1% year on year. This compared to 3.8% in the prior quarter and 11% a year ago.
The non-oil sector, which employs the majority of Saudis and which the government wishes to promote in order to diversify the economy, grew 5.5%. The GDP of the oil industry fell by 4.2%.
Read more: Saudi Arabia imports Russian oil, sends its own supplies to EU
The Kingdom received the biggest downgrading among major economies from the International Monetary Fund earlier this month, reducing the growth forecast for 2023 to 1.9%, a 1.2 percentage point decrease from the Washington-based lender's previous projection.
In 2022, the economy grew by 9%, the fastest in the G20, thanks to record crude output of roughly 10.5 million barrels per day and prices averaging above $100 per barrel as energy markets suffered due to the ongoing war in Ukraine.
This year, severe production cuts meant to support crude prices have driven Saudi oil output to its lowest level in years. Brent crude is now trading about $84.60 per barrel, down 1.6% from the end of 2022.
The $1 trillion economy's earnings from foreign oil sales fell to the lowest since September 2021.
In early July, Russia announced that Moscow will voluntarily cut oil exports by 500,000 barrels per day, building on previously declared production cuts.
Last month, oil prices rose as Saudi Arabia reduced output by a million barrels to support prices, while fellow OPEC+ members agreed to extend current cuts until 2024. Saudi Arabia announced its own fresh reduction, bringing July output to nine million barrels per day.
OPEC+ countries are dealing with dropping oil prices due to expectations that demand would decline as major economies battle to contain rising inflation. Oil has fallen by approximately 10% since April when some OPEC+ members agreed to cut production by more than one million bpd voluntarily in an effort to stop losses.
