Saudi Arabia trades economic growth for oil-price stability 
RIYADH: The International Monetary Fund has revised its previous economic growth forecast for Saudi Arabia for this year to 0.8 percent, down from its earlier estimate of 1.9 percent in July.
According to the IMF’s World Economic Outlook report released this month, the Saudi economy was expected to grow with the potential to reach 4 percent in 2024.
The IMF attributed the decrease in the Kingdom’s economic growth for 2023 to its deliberate reduction in oil production output. However, it noted that investments in mega projects were expected to continue supporting non-oil gross domestic product growth.
Similarly, the country’s pre-budget statement for 2024 forecasted that GDP would grow by 0.03 percent in 2023, a notable reduction from the projected growth of 3.1 percent.
The primary factor contributing to the fall in Saudi Arabia’s GDP growth in 2023 was the decline in the average price of Brent crude oil.
Brent crude oil prices experienced a significant decrease from the beginning of the year through August, falling by 22.2 percent to an average price of $80.8 per barrel, as compared to $103.8 per barrel during the same period in 2022.
The fluctuation in average oil prices this year was a result of the slow growth of the global economy, which was driven by high inflation and interest rates, as well as the conflict between Russia and Ukraine.
To support the stability of oil prices, the Kingdom has voluntarily reduced its supplies.
The Kingdom’s average crude oil supply decreased from the beginning of January to the end of August by 5.22 percent, reaching 9.96 million barrels per day, representing a decline of 548,000 bpd.
Furthermore, Saudi Arabia announced a voluntary production cut of 500,000 barrels in May and extended it through to December 2024. And it initiated an additional voluntary cut of 1 million bpd starting in July, a reduction that was further extended until the end of this year.
The Saudi decision to cut its oil production output was aligned with OPEC’s objectives to coordinate and unify petroleum policies among member countries. The aim was to secure fair and stable oil prices for petroleum producers and ensure a regular supply of petroleum to consuming nations while also providing a fair return on capital to those investing in the industry.
Although OPEC+ maintained its oil demand growth forecasts for 2023 and 2024 unchanged, OPEC projected that demand would increase in the medium and long term.
In its 2023 World Oil Outlook, OPEC anticipated that global energy demand would increase by 23 percent between now and 2045, reaching 116 million bpd. The growth projection was based on scientific and data-driven analysis, responding to the expected increases in both world population and the global economy.
Saudi Arabia has made a wise decision to reduce its oil production in light of its economic growth to ensure the stability of both oil prices and supplies.
The economic and fiscal reforms, along with the objectives of Vision 2030, are expected to stimulate private-sector growth and bolster non-oil economic sectors, including tourism and logistics.
This, in turn, was anticipated to foster the expansion of the local economy, even in the face of sluggish growth in the oil sector.
• Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
