Saudi Arabia's first-quarter GDP grows by 3.4%, beating flash estimates
First-quarter GDP grew by 3.4% compared to the same quarter of the previous year, beating flash estimates of 2.7% released in May by the Saudi General Authority for Statistics.
"The upward revision was both due to a smaller annual contraction from the oil sector and stronger private sector growth," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Oil GDP shrank by 0.5%, while initial flash estimates had shown it contracting by 1.4%.
Non-oil growth reached 4.9% compared to estimates last month pointing to a 4.2% increase.
The impact of lower oil prices may have been blunted by the kingdom's increase of oil output.
The kingdom faces a widening budget deficit with the International Monetary Fund saying Riyadh needs a price of oil of over $90 per barrel to balance its books compared to prices of around $60 per barrel in recent weeks.
Saudi Arabia, the world's biggest oil exporter, lowered its July prices for Asian buyers at the beginning of June, after Organization of the Petroleum Exporting Countries and allies, known as OPEC+, hiked output for a fourth month.
OPEC+ agreed to another big output increase of 411,000 bpd for July, having increased output by the same amount in May and June.
Saudi Arabia is in the midst of a costly economic transformation program known as Vision 2030 that aims to wean the economy off oil dependency and has been funneling billions into massive new development projects.
Saudi Finance Minister Mohammed Al-Jadaan said the kingdom would "take stock" of its spending priorities in response to a significant decline in oil revenue, the Financial Times reported in May.
"We also expect to see some pullback in government spending to limit the widening of the fiscal deficit, which will likely weigh on non-oil growth," said Malik.
Daniel Richards, senior economist at Emirates NBD, said that still, the bank believes that spending will remain high.
"There is still sufficient project spending already in progress that growth will remain supported through this year and next at least," he wrote in a note.
Saudi Arabia is committed to hosting several large international events, each of which require significant spending on construction and development.
These include the 2029 Asian Winter Games, set to feature artificial snow and a man-made freshwater lake, and the 2034 World Cup, for which 11 new stadiums will be built and others renovated.
Saudi Arabia's 2025 fiscal deficit is forecast at around 101 billion riyals ($27 billion).
(Reporting by Pesha Magid; Editing by Toby Chopra)
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