Country Economic Forecasts > Saudi Arabia

GDP grew just 1.5% y/y in Q1, its weakest outturn in three years. While oil sector output rose by a surprisingly robust 5.1% due to increases in oil output and refining, non-oil GDP slumped by 0.7% y/y, including a sharp deceleration in private sector growth to 0.2% y/y as the impact of government austerity measures filter through the economy. Weak private sector growth will be a concern given its key importance in driving forward the much-vaunted National Transformation Plan that was launched on June 6. Despite talk of rebalancing in the oil market and of Saudi returning to its traditional swing producer role, we can expect production to remain broadly stable for the rest of the year, which would leave it just 0.5% y/y higher for the full-year. With non-oil growth remaining weak due to continued austerity policies but rising by nearly 1% as oil prices see a modest recovery, we forecast overall GDP growth of 0.8% this year.