Saudi Arabia's 2009 growth lowest in 7 years

A sharp cut in oil production depressed Saudi Arabia's real GDP growth in 2009 to its lowest level in nearly seven years but the economy is projected to rebound to 2008's high levels, official data showed yesterday.

The Gulf kingdom's GDP, which accounts for nearly a fifth of the combined Arab economy, grew by only around 0.6 per cent in 2009, far lower than the 4.2 per cent increase recorded in the previous year, showed the figures by the Saudi Arabian Monetary Agency (Sama), the country's central bank.

Last year's growth was the lowest since 2002, when real GDP edged up by about 0.1 per cent after surging by 4.9 per cent in 2001 on the back of higher oil prices.

Sitting atop a quarter of the world's oil wealth, Saudi Arabia had earlier estimated real GDP growth at 0.15 per cent in 2009 but it revised up that figure this month after higher-than-expected growth in the non-oil sector.

Sama's annual report for 2009 showed the kingdom's non-oil private sector expanded by about 3.5 per cent last year while there was growth of 4.4 per cent in the non-oil government sector. It put growth in the overall non-oil sector at around 3.8 per cent, still lower than the 4.3 per cent recorded in 2008. The report showed the country's oil sector dipped by 6.7 per cent in real terms last year on the back of lower crude output. Independent estimates showed Saudi Arabia, which pumps nearly a third of Opec's crude output, produced an average 8.2 million barrels per day (bpd) in 2009 compared with 9.2 million bpd in 2008.

According to the Riyadh-based Jadwa Investments, Saudi Arabia's GDP recorded positive growth last year because of massive state spending as part of the Kingdom's ongoing fiscal stimulus to cushion the impact of the global crisis.

With such spending even gaining pace and oil prices are projected higher this year, Saudi Arabia's economy is forecast to sharply rebound by around 3.9 per cent in 2010 and nearly 4.2 per cent in 2011.

The projections by Banque Saudi Fransi showed growth would also be supported by an expected increase of nearly 200,000 in the country's oil output in 2010. Like other Gulf countries, Saudi Arabia's economy is highly influenced by fluctuations in oil prices given the large share of the hydrocarbon sector in its GDP. In 1999, when oil prices were at one of their lowest levels and the kingdom was under-producing, real GDP shrank by 0.7 per cent. In contrast, GDP recorded one of its highest growth rates of 7.7 per cent in 2003 after a surge in crude prices and the country's oil output.

In current prices, Saudi Arabia's GDP plunged by 21.2 per cent in 2009 after crude prices tumbled by more than $30 to around $62 in 2009 from an average $95 in 2008. Their surge in 2008 boosted the kingdom's nominal GDP by 23.8 per cent, one of its highest growth rates in the country's history. A breakdown shows the oil sector has remained the dominant single component of Saudi Arabia's GDP despite an ongoing drive to diversify its economy.

In current prices, the oil sector contributed by SR691.1bn to GDP in 2009, a share of around 49 per cent of the overall GDP of SR1,409bn.

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