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Saudi economy set to grow this year, driven by non-oil sector: central bank

Saudi investments in non-oil infrastructure projects will continue to support economic activity this year, economists say. (AFP)
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Updated 23 February 2020

Saudi economy set to grow this year, driven by non-oil sector: central bank

  • ‘The forecasts are positive and growth is expected to be higher than last year, especially from the private sector’
  • Saudi investments in non-oil infrastructure projects will continue to support economic activity this year

RIYADH: Saudi Arabia’s economy is expected to grow this year, supported by the non-oil sector, despite a challenging global economic backdrop, the Saudi central bank governor said on Saturday as the kingdom hosts the G20 meeting.
Ahmed Al-Kholifey said it was too early to see the full picture of the economic damage caused by the new coronavirus, which has emerged in China and spread globally.
The Saudi Arabian Monetary Authority governor was speaking at an economic conference in Riyadh, where finance leaders of the world’s 20 largest economies have gathered this weekend to discuss policies and the impact of the virus on global growth.
“GDP growth in Saudi Arabia is projected to see an upturn in 2020,” said Kholifey. “Monetary, fiscal and structural policies in my country are all geared towards an expansion of the private non-oil sector GDP over the medium term,” he said.
The International Monetary Fund said in January it expects the Saudi economy to expand 1.9 percent this year, up from an estimated 0.4 percent in 2019. However, it lowered its forecast for the kingdom’s 2020 growth from 2.2 percent due to lower oil output.

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“We have a positive view on the Saudi economy, the forecasts are positive and growth is expected to be higher than last year, especially from the private sector,” Kholifey said.
After a bad year for the global economy last year, with the weakest global GDP growth since the financial crisis, Kholifey said Saudi Arabia was looking for “good news” this weekend.
“At our upcoming G20 meeting, we will be looking for good news from other countries as well, which overall will hopefully confirm the baseline projection that the growth slowdown has bottomed out and a turnaround in output growth in the current year can be expected, albeit a moderate one,” he added.
But he cautioned that trade tensions, geopolitical risks, and the outbreak of the new coronavirus were downside risks to global growth.
The comments came after the Institute of International Finance warned on Friday that the virus outbreak may curb demand for oil in China and other Asian countries, depressing crude prices further, to as low as $57 a barrel, and clouding growth prospects across the Middle East.
Even as the oil-based economy suffers, economists have said Saudi investments in non-oil infrastructure projects led by the Public Investment Fund will continue to support economic activity this year. Saudi non-oil economic output grew 4.33 percent in the third quarter of 2019, even though the overall economy contracted by 0.46 percent, hit by a drop in oil production.


Virtual oil summit planned amid ongoing market volatility

Updated 04 April 2020

Virtual oil summit planned amid ongoing market volatility

  • Meeting follows call from Saudi Arabia for urgent meeting and telephone diplomacy between Kingdom, Russia and the US

DUBAI: Leaders of the global oil industry are planning a crucial “virtual” summit next Monday amid ongoing volatility in crude prices and falling energy demand.

The meeting follows a call from Saudi Arabia on Thursday for an urgent meeting and a round of telephone diplomacy last week involving the Kingdom, Russia and the US, as well as meetings between policymakers and oil industry executives.

The summit is expected to involve the 11 members of OPEC as well as other oil producers from the OPEC+ group.

But exactly which countries will take part in the summit was still up in the air last night. 

Russian President Vladimir Putin was holding talks with executives from the country’s major oil companies before deciding whether or not to participate. The Russian leader has previously indicated his willingness to get involved in talks to help resolve the crisis in the global energy industry, but Russia was also the country that refused to take part in a round of deeper production cuts proposed by Saudi Arabia in Vienna last month, sparking the current price war.

In response to that refusal, the Kingdom increased production and lowered its selling prices. On Sunday, Saudi Aramco, which has pushed output to a record 12.3 million barrels per day, is scheduled to announce its “official selling prices” (OSP) for the month of May, expected to show a continuation of the deep levels of discount to attract customers, especially in Asia, in the battle for global market share. 

Brent crude continued its rollercoaster ride on global markets on Friday, dipping nearly 5 percent before hitting a high of 17.5 percent up at $34.91, before paring gains to about $33.

The options for the producers at Monday’s meeting are limited, in the face of an unprecedented drop in global oil demand. By some estimates, more than 20 million barrels of daily demand was lost last month, the biggest ever contraction in oil history.

Saudi Arabia and Russia, which between them produce around 23 million barrels per day, are unlikely to be willing to take all the pain of bigger cuts without an offer from the Americans.

US President Donald Trump tweeted on Thursday that he expected between 10 million and 15 million barrels of oil to be taken out of supply, but he did not specify where this would come from. Meetings were expected to take place at the White House with oil industry executives and policymakers on Friday.

Daniel Yergin, Pulitzer Prize-winning oil expert, said: “The ‘when,’ ‘how’ and ‘who’ of the potential deal remain unclear. And the larger the universe of players the more difficult it will be to implement an agreement.”

OPEC+ consists of the 11 OPEC members, led by Saudi Arabia, plus 10 non-OPEC producers, of which Russia is by far the biggest.

The involvement of the US in the Monday meeting is also unclear. America is not an OPEC member, but US oil executives have attended OPEC deliberations in the past. American participation in any new rounds of output cuts will be constrained by the fact that the US oil industry is made up of private companies — as opposed to state-directed corporations — whose interests diverge.

While big players including Exxon Mobil and Chevron might be willing to take some advice from the White House, the smaller companies in the Texas shale fields are more focused on the immediate financial repercussions of the past month’s volatility.