Country Economic Forecasts > Saudi Arabia

Economic activity data were very weak in February, with broad money growth turning negative for the first time since 1994, point of sale transactions declining 9% y/y and the non-oil PMI indicator in March remaining close to Januarys record low at 54.5. The slowdown is the result of the impact on the business climate of the plunge in oil prices, the cumulative effect of cuts in government spending on demand and the tightening of market liquidity partly linked to the withdrawal of official deposits from the banking system as the government looks to cover its large fiscal deficit, forecast at 14% of GDP this year. Nevertheless, these developments are broadly in line with our expectations and our forecast for non-oil GDP growth is unchanged at 1% this year, edging up to a still modest 1.5% in 2017 as the pace of austerity eases somewhat. Meanwhile, although there is much uncertainty regarding Saudi and OPEC oil market policy, we currently see Saudi crude output more or less stable at around 10.2 m b/d in 2016 and edging 1% higher next year, amidst continued oil price weakness. This would leave overall GDP growth at just 0.8% in 2016, rising to 1.5% in 2017.