publication October 3, 2018

Saudi Arabia's Economic Outlook - October 2018

The Saudi Arabian economy is recovering from a mild contraction in 2017, driven largely by higher oil production and rising consumer spending. Saudi crude oil production reached 10.4 million barrels per day (mbpd) in June 2018, its highest level since December 2016, just before the OPEC+ agreement for limiting production.  Consumer spending is on the rise, with point of sale transactions up 6.8 percent year-on-year in June. Non-oil exports also registered a marked increase of 26 percent year-onyear in April 2018 (latest available).

GDP is projected to grow by around 2 percent in 2018-19, driven by higher oil production after the expiration of OPEC+ agreement, greater non-oil exports, and brisk domestic demand. The oil price rebound will enable further narrowing of the budget deficit in 2018 to 4.1 percent of GDP, and then again to 1.9 percent in 2019. Although oil revenues are the primary driver, the improving fiscal outlook also relies on commitment to reform efforts to raise non-oil revenues.