Saudi Arabia’s gross domestic product (GDP) has shrunk again in the second quarter compared to the same period last year, driven by an 8.5% decline in oil activities as the Kingdom cuts oil production under the OPEC+ agreement and additional voluntary output curbs.
According to reports, the Saudi economy shrank by 0.4% in the second quarter of 2024 compared to the second quarter of 2023. This marked the fourth consecutive quarter of GDP contraction for the world’s largest crude oil exporter, which is reducing output by around 1.5 million barrels per day (bpd), including a voluntary reduction of 1 million bpd.
The primary driver of the economic contraction in Q2 2024 has been attributed to the 8.5% year-over-year decline in oil activities. In contrast, non-oil activities increased by 4.4%, and government activities rose by 3.6% annually, according to the Saudi Statistics Authority.
Earlier this month, the International Monetary Fund (IMF) downgraded its growth forecast for the Saudi economy due to the ongoing OPEC+ oil production cuts. The IMF now projects Saudi Arabia’s economic growth for 2024 at just 1.7%, down from its earlier forecast of 2.6%.
The IMF expects the effects of the cuts to extend into the coming year, projecting GDP growth of 4.7% in 2025, a downward revision of 1.3 percentage points from April. Last year, the Saudi economy contracted by 0.8%, also affected by the oil production cuts.
Despite efforts to diversify its economy, Saudi Arabia remains heavily dependent on crude production and exports for government revenue. In May 2024, oil exports accounted for 72.4% of total exports, slightly down from 73.0% in May 2023.
Saudi Arabia’s 2024 budget projects revenues of $312.5 billion and expenditures of $333.5 billion, resulting in a deficit of over $21 billion.
The budget allocates the highest amount of $71.7 billion for military spending, followed by $57.6 billion for general items, $57 billion for health and social development, and $52 billion for education.
Earlier this month, majority state-owned Saudi Aramco raised up to $12.4 billion from its secondary share sale. The proceeds from this offering are intended to finance the Gulf state’s economic diversification efforts in line with its Vision 2030.
