Saudi GDP growth could dip in 2021 on lower oil production

In an update to their economic forecast for Saudi Arabia, Riyadh-based Jadwa Investment said 2021 GDP growth is likely to dip on the back of its lowered estimates for Saudi crude output.

While the investment bank has raised its Brent oil price forecast to $62 per barrel, it revised down Saudi crude oil output for full year 2021to 9 million barrels per day (mbpd) versus 9.3 mbpd it had previously forecast.

“Running the updated numbers through our model results in an improved fiscal position, primarily as a result of higher oil revenue. Overall, total revenue is now at 888 billion riyals (versus 851 billion riyals previously).”

This, combined with government expenditure of 990 billion riyals, means the fiscal deficit comes out lower at 102 billion riyals or 3.3 percent lower, vs. 139 billion riyals or 4.8 percent lower previously, it noted.

“Meanwhile, lower yearly crude oil output means we now see Saudi oil GDP declining by 0.7 percent year-on-year in 2021 (vs. a rise of 1.4 percent previously). With no changes to our non-oil GDP forecast, overall GDP is now expected to rise by 1.3 percent (vs. 2.1 percent previously).”

Lastly, higher oil export revenue should push the current account to a surplus of 5 percent of GDP (2.5 percent previously), which will have a net effect of raising foreign exchange  reserves to $462 billion by the end of the year, said Jadwa.

The OPEC+ alliance has agreed to cutting oil production by just over 7 million barrels per day in an attempt reduce oversupply and stabilize prices. Saudi Arabia volunteered to cut an additional 1 million barrels per day.

 

Source: https://www.zawya.com/mena/en/economy/story/Saudi_GDP_growth_could_dip_in_2021_on_lower_oil_production-ZAWYA20210422055745/

 

 

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