Saudi Arabia's GDP expands 2.7% in first quarter

By Pesha Magid, Hadeel Al Sayegh and Manya Saini

RIYADH/DUBAI (Reuters) - Saudi Arabia’s economy grew in the first quarter, supported by activity in the non-oil sector as the kingdom pushes on with diversifying away from hydrocarbons.

Real gross domestic product (GDP) increased 2.7% year-on-year in the first quarter, flash estimates by the government's statistical authority showed on Thursday.

The government body updated and expanded its data collection and said its nominal and real GDP time series have been revised accordingly.

“The demand from everybody, when we met with them, there was always they are hungry for more details, more statistics, more data. So the local demand is the main driver for this,” said Fahad al Dossari, President of GASTAT.

As part of the revision, the authority said it increased the weighting of the non-oil sector to better align with international standards and data quality.

Non-oil activities increased by 4.2% in the first quarter, in addition to the growth of government activities by 3.2%.

"Private sector activity remained solid, which we continue to see reflecting the progress with the investment programme. There was a notable quarterly jump in government activity, likely boosted by the relatively supported oil price in the first quarter," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

"We expect to see some pullback in government spending from second quarter with the sharply lower oil price, which is expected to dampen government activity for the remainder of the year," Malik said.

Oil activities recorded a decrease of 1.4%, the statement showed.

Saudi Arabia needs hundreds of billions of dollars to fund its plan to diversify its economy away from oil, known as Vision 2030, which aims to expand the private sector and boost the non-oil economy.

A Reuters poll earlier this week showed Brent crude will likely average $68.99 a barrel in 2025, down from March's estimate of $72.94. Saudi Arabia needs oil at $96.2 to balance its 2024 budget, the IMF forecasts.

Earlier this month, the International Monetary Fund cut the forecast for Saudi Arabia's GDP growth in 2025 to 3% versus a January estimate of a 3.3% increase.

Saudi Arabian officials are briefing allies and industry experts that the kingdom is unwilling to prop up the oil market with further supply cuts and can handle a prolonged period of low prices, Reuters reported citing sources earlier this week.

(Reporting by Hadeel Al Sayegh and Manya Saini in Dubai and Pesha Magid in Riyadh; Editing by Alex Richardson, William Maclean)

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