PIF – engine of economic diversification: Year in review
RIYAD: The Saudi economy recovered in 2021 after a difficult year of pandemic restrictions as vaccination campaigns unfolded in the Kingdom and around the world, driving its main oil exports.
The MENA region’s largest economy rebounded from last year, when the Kingdom’s gross domestic product contracted 4.1%, according to the International Monetary Fund.
But this year saw higher oil production, its first quarterly budget surplus in more than two years, and lower unemployment spurred growth.
Some economic data in 2021 has even improved pre-pandemic levels, although the full effect of the latest omicron variant has yet to be played out.
Here are the Kingdom’s economic highlights this year:
First quarter: Increase in oil exports
The value of oil exports continued to rebound in the first quarter of 2021, increasing for the third consecutive quarter and reaching its highest level since the last quarter of 2019, according to official data.
However, in the four quarters of 2021, the Kingdom’s oil exports were lower compared to the corresponding periods of 2019.
Second quarter: unemployment falls
Oil and non-oil exports grew at an annual rate of 123% and 61% in the second quarter in value, respectively, according to the General Statistics Authority. These are the highest annual growth rates for both categories since at least 2018.
In June, the value of Saudi Arabia’s oil exports rose 123 percent to SR 61.5 billion ($ 16.4 billion) from a year ago, GASTAT said.
Oil exports accounted for 72% of total exports in June, up from 62% in the same month last year, he added.
The unemployment rate among Saudi nationals fell to 11.3% in the second quarter, the lowest since at least the same period in 2016, said GASTAT, attributed to the government’s continued efforts to boost local employment in the sector. private.
In contrast, Saudi unemployment hovered at an average rate of 13.7% in 2020.
The third quarter: budget surplus and lower inflation
The value of oil exports reached SR 206.6 billion in the third quarter, the highest since the last quarter of 2018, as the sector benefited from growing demand and higher prices.
This led to the Kingdom’s GDP surging 7% during the period, the highest annual rate since 2012. Oil and non-oil production jumped 9.3% and 6.3%, respectively.
The finance ministry added that the Kingdom recorded its first quarterly budget surplus since the first quarter of 2019. The surplus was valued at SR 6.7 billion, reversing a deficit of SR 4.6 billion in the previous quarter.
The recovery was driven by high multi-year crude prices and cuts in government social spending, as the pandemic abated.
In August, the Kingdom’s annual inflation rate hit its lowest level in 20 months, hitting 0.3%. The rise in consumer prices in the second half of the year slowed down, as the effects of the VAT hike from 5% to 15% in July 2020 wore off.
The inflation rate in June 2021 was 6.2%, before falling to 0.4% in July.
Saudi Arabia’s private sector saw its strongest growth in September since 2015, according to IHS Markit, driven by new orders and higher production. Buyers have received a boost following the easing of foreclosure restrictions, spurring growth.
In 2020, Saudi Arabia’s annual inflation rate averaged 3.4%, due to the VAT hike.
In addition, the budget deficit reached SR 293.9 billion in 2020, more than double that of 2019. Spending on social benefits, grants and subsidies has all been increased, at the height of the pandemic.
The fourth quarter: No more oil production
Saudi oil exports and production in October hit their highest levels since April 2020, according to data released by Jodi. Oil shipments rose 5% from the previous month to 6.83 million barrels per day. Fuel production reached 9.78 million barrels per day, barely more than in September, but it was 9% more than a year ago.
Forecast for 2022
The outlook for the Saudi economy next year is favorable, according to the government and economic forecasters.
The Ministry of Finance expects a 2022 budget surplus of SR 90 billion, as revenues are expected to increase by 12.4% from the estimated revenues for this year. Spending is expected to decrease by 5.9%. This will give the Kingdom its first budget surplus since 2013, if it is achieved.
The ministry predicts that the economy will grow 7.4% next year.
Capital Economics has a similar forecast of 7.3%, claiming that oil production will increase production in the Kingdom in 2022.
The GCC Statistical Center, Jadwa Investment as well as Capital Economics expect Saudi inflation in 2022 to be between 1 and 2%, while last year’s VAT hike continues to ease.