Saudi Arabia’s gross home product shrank from a yr earlier within the first quarter of 2017 for the primary time because the international monetary disaster, however the personal sector strengthened progressively, official knowledge confirmed on Friday.
GDP, adjusted for inflation, shrank zero.5 % yr-on-yr between January and March, its first fall since 2009. That was virtually totally due to a 2.three % contraction within the oil sector, as Saudi Arabia minimize its crude output underneath a worldwide deal amongst producing nations to prop up costs.
The non-oil authorities sector of the financial system shrank zero.1 %, displaying Riyadh continued to maintain a decent rein on state spending because it tried to chop an enormous finances deficit brought on by low oil costs.
However the non-oil personal sector grew zero.9 %, accelerating from a revised zero.5 % within the fourth quarter of final yr. It was the quickest personal sector enlargement because the fourth quarter of 2015.
Personal companies have been hit arduous by authorities austerity measures, together with greater home power costs and delays within the authorities paying its money owed to corporations. Late final yr, nevertheless, Riyadh started settling its money owed extra promptly, boosting the personal sector.
The outlook for progress in the remainder of this yr is murky. In current weeks Riyadh has eased its austerity drive barely, restoring monetary allowances to public sector staff, and this could assist consumption barely.
Additionally, the federal government plans to introduce a 5 % worth-added tax at the beginning of 2018, so there could also be a consumption mini-growth within the previous months as Saudis make massive-ticket purchases to keep away from the tax.
However some austerity steps are going forward this yr, similar to greater residence charges for expatriates, who make up a few third of the inhabitants. Additionally, the oil output deal extends via the top of 2017, so the oil sector will proceed to tug on progress.
Regardless of the deal, the Brent oil worth is again round $forty eight a barrel – not far above its degree when Riyadh initially agreed on the deal late final yr – which can imply the federal government has much less cash to spend on kickstarting financial tasks than the personal sector has been hoping.
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