Thursday, 26 May, 2022
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KSA’s economy to grow 7.7pc in 2022

RIYADH: Saudi Arabia’s economy is expected to expand 7.7 per cent in 2022, after 3.3 per cent growth in 2021, as the coronavirus-related uncertainty that marked the last two years recedes, according to private equity and investment group Jadwa Investment.

The oil sector’s gross domestic product is projected to expand 15.5 per cent a year in 2022 as demand reaches record highs and the kingdom raises output by about 100,000 barrels per day each month under the current Opec+ production agreement, Jadwa said in a report.

The non-oil economy is expected to grow 3.4 per cent a year in 2022, with all sectors set to register growth, led by wholesale and retail sectors, restaurants and hotels, as pandemic-related restrictions ease, report agencies.

“Saudi Arabia’s economy will exhibit strong levels of growth in 2022, as pandemic-related uncertainty and volatility seen over the last couple of years diminishes,” the bank said in its February report.

Other predictions also expect the Arab world’s biggest economy to grow strongly this year. Real GDP in the kingdom, Opec’s biggest oil producer and the world’s largest exporter, is expected to expand 7.6 per cent in 2022, according to Japan’s largest bank MUFG, while Emirates NBD forecasts 6 per cent growth.

The International Monetary Fund expects the kingdom’s economy to grow 4.8 per cent.

Saudi Arabia is expected to register a fiscal surplus of 120 billion Saudi riyals ($32bn), equal to 3.4 per cent of the GDP, as expenditure is expected to decline 6 per cent a year to 955bn riyals, Jadwa said. The government’s oil revenue will total 710bn riyals, which, combined with non-oil revenue of about 365bn riyals, will result in total government revenue of 1.07 trillion riyals in 2022.

Price inflation will rise to 1.7 per cent a year, as higher levels of inflation recorded in many developed economies do not fully transmit into the local economy, the report said.

“This is because, on the one hand, a large portion of the kingdom’s imports are from countries that are not expected to see significant rises in inflation [such as China], but also because, on the other hand, as the Fed raises US interest rates, the value of the dollar [and therefore the Saudi riyal] is expected to rise, which should help limit imported inflation during the year,” it said.

Saudi Arabia, which has administered more than 59 million Covid-19 vaccine doses so far and has fully vaccinated 70 per cent of its population, is unlikely to suffer a recurrence of pandemic-related disruptions, Jadwa said.

“As a result, we see Covid-19 presenting limited risks to the Saudi economy going forward,” the report said.

Looking ahead to 2023, the Saudi economy is forecast to grow 3.1 per cent as oil GDP rises 2 per cent a year, according to Jadwa.

A multiyear underinvestment in hydrocarbon exploration and production investment will mean that the output of many oil producers will probably decline.

This will translate into higher demand for Saudi crude oil despite mild yearly declines in overall global oil demand next year, the report said.