Saudi nominal GDP leaps 26.1% in H1

A surge of nearly 37 per cent in crude prices catapulted Saudi Arabia’s economy by nearly 26.1 per cent in current prices in the first half of 2011 while all sectors recorded growth, a local report showed on Wednesday.

The nominal GDP of the world’s dominant oil exporter jumped by around 24.6 per cent in the first quarter and 27.5 per cent in the second quarter as oil prices have remained above $100 a barrel, the Riyadh-based Jadwa Investments said.

In the first half, the oil sector shot up by 36.9 per cent while there was growth of 20.5 per cent in the public sector, 12.9 per cent in the non-oil sector and 8.4 per cent in the private sector, the report showed.

“Nominal data is not adjusted for price movements, so higher oil prices meant that oil was by far the fastest growing sector, at 39.5 per cent.”

The report showed there was little change in non-oil private sector growth between the first and second quarters despite the announcement of SR500 billion of new government spending and the easing of regional unrest. Data adjusted for inflation was not published.

“The growth in the oil sector was largely the result of higher prices. We estimate that the price earned by the Kingdom for its average barrel of export crude rose to $104.6 per barrel in the first half of this year from $76.4 per barrel in the corresponding period of 2010, an increase of 37 per cent. Oil production was up by 10 per cent over the same period,” Jadwa said.

“While this equates to higher growth than that in the official data, our oil price estimates are complicated by the unusually large divergence that has opened between the key oil price benchmarks of Brent and WTI. In addition, the official data is subject to revision (the growth numbers for the first and second quarters of 2010 have been revised slightly).”

The report said non-oil growth was driven by the government sector, adding that non-hydrocarbon public sector growth was more than double the rate of non-oil private sector growth and rose significantly in the second quarter.

It attributed this to the greater government expenditure unleashed by new spending packages in February and March bolstering an already high increase in budgeted spending. The government services component of GDP was up by 27 per cent year-on-year in the second quarter and was nearly 49 per cent above the level in the same quarter of 2009, it said.

“Given this surge in government activity, and the leap in consumer spending that followed the award of a bonus for public-sector workers late in the first quarter, the pattern of growth in the non-oil private sector was surprising,” it said.

It showed non-oil private sector growth only rose from 8.2 per cent in the first quarter, when the stock market plunged and regional uncertainty was at its peak, to 8.5 percent in the second quarter.

Manufacturing was the fastest growing private sector in the first half, rising by 22.5 per cent, driven by a 38 per cent increase in petroleum refining.

Refining accounts for around 20 per cent of the manufacturing sector and its value is heavily influenced by the oil sector, according to Jadwa.

Non-refining manufacturing expanded by 14.8 per cent, due largely to higher prices for petrochemicals, plastics and related products and greater output of construction materials.”

Construction was the next fastest growing private sector, at 9.2 per cent, though growth slowed from the first to the second quarter, an indication that the house-building program announced in March did not spur an immediate jump in activity.

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