Saudi out of recession, oil to fuel GDP growth

Saudi Arabia’s economy pulled out of recession in the first quarter of 2018 after shrinking for the first time in eight years during 2017, official data showed yesterday, and the recovery looks set to accelerate in coming months with a rise in oil production.

Gross domestic product, adjusted for inflation, grew 1.2 percent from a year earlier in the first three months of 2018, the government’s statistics agency said.

GDP had dropped from a year earlier in every quarter of 2017 as a global price-supporting agreement among oil exporting countries caused Saudi Arabia to cut back its crude output.

For the whole of 2017, GDP shrank 0.7 percent.

The impact of the oil deal faded at the start of 2018 after Saudi Arabia completed the required cuts. This allowed the oil sector, which comprises over 40 percent of the economy, to grow 0.6 percent from a year ago in the first quarter — a big contrast to its 4.3 percent decline in the last quarter of 2017.

Oil prices have been steadily rising since early 2016, when OPEC and non-OPEC producers struck a deal to cut output. In the next several months, Saudi oil production is set to expand.

Global producers agreed last month to boost output by a combined 700,000 to 1 million barrels per day, and as the world’s biggest crude exporter, Riyadh may account for the lion’s share of the increase.