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Saudi Arabia's economy contracts again after oil cuts

SAUDI Arabia’s economy contracted in the fourth quarter, as the world’s biggest crude exporter extended its oil output cuts in an attempt to push up prices.

Gross domestic product shrank 3.7 per cent compared with a year earlier, after a decline of 4.4 per cent in the previous quarter, according to preliminary data released on Wednesday (Jan 31) by the kingdom’s statistics agency. For 2023 as a whole, GDP shrunk 0.9 per cent.

A slump that started with output reductions remains largely confined to the energy industry, with oil activities dropping by 16 per cent in the fourth quarter. Growth in non-oil activities, the engine of job creation, reached 4.3 per cent.

The International Monetary Fund (IMF) estimates the economy shrank 1.1 per cent last year, when Saudi Arabia prolonged a production cut that’s left it pumping 9 million barrels per day, the lowest in several years.

While the IMF expects the kingdom to return to growth this year and next, its projection for Saudi Arabia saw the biggest downgrade for 2024 after Argentina in the Group of 20.

Following the first budget surplus in nearly a decade in 2022, the kingdom rewrote its medium-term spending plans and shifted from forecasting years of surpluses to deficits until at least 2026 as it accelerates spending. Saudi Arabia is having to delay past 2030 some of the projects launched as part of the Crown Prince Mohammed Salman’s economic transformation plan.


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