Jadwa Investment: Saudi Economy Adapts to Structural Changes

Jadwa Investment: Saudi Economy Adapts to Structural Changes

Thursday, 8 November, 2018 - 11:45
Riyadh- Asharq Al-Awsat
The Saudi economy is adapting to structural changes and is expected to grow by 2.2 percent in 2018, compared to a 0.9 percent decline last year, according to an economic report issued by Jadwa Investment.

In its report, Jadwa noted that the improvement in the oil sector will increase the gross output of to 3.2 percent.

As for the non-oil sector, Jadwa retained its forecast that its GDP will grow 1.4 percent during the same period in the light of its projections for the non-oil private sector to rise to 1.1 percent compared to 0.7 percent in 2017.

The report explained that factors influencing growth are found to be related to the application of value-added tax, accompanying fees, financial compensation for expatriate workers and higher energy prices, as the non-oil purchasing managers’ index (PMI) has rebounded in recent months, averaging 53.6 during the period from the beginning of the year until September.

Private sector loans remained weak as high-interest rates made private sector borrowing more expensive, with GDP growth forecast at 2 percent and oil sector growth of 2.3 percent.

Jadwa indicated that non-oil is likely to continue to grow thanks to another record level of budgeted government expenditure of $293.3 billion, as indicated in the preliminary statement of the state budget for 2019.

GDP of the non-oil sector is expected to grow 1.8 percent, recording its highest level since 2015.

The report anticipated the economy will absorb the negative effects of value-added tax and energy price reform that started in 2018.

The report suggested higher operating costs in the event of any further increases in the electricity tariff for the industrial sector, with the expectation that the scheduled increases in the prices of liquefied petroleum gas and kerosene will be applied to the retail sector in 2019.

According to Jadwa, total consumption of liquefied petroleum gas and kerosene currently accounts for about 7 percent of total oil consumption in Saudi Arabia.

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