A recently-released report by Jadwa Investment revises downward the overall Saudi gross domestic product (GDP), now estimated to contract by 3.7% in 2020, as the Kingdom sees its oil diplomacy achieve enormous successes in stabilizing the markets after dual shocks earlier this year.
The new figure is a larger decline than the previously estimated (3%). Jadwa forecasts oil GDP for this year to contract at -4.8% compared with -2.9% previously, but Jadwa made no revisions to the non-oil GDP forecast at -3%.
Graphic via Jadwa Investment.
“The only change to our economic forecast for Saudi Arabia relates to the oil sector. Ongoing efforts by OPEC and partners (OPEC+) to stabilize oil markets have seen monumental efforts in oil diplomacy resulting in frequent adjustments in output targets, roll-overs, voluntary reductions and ‘catch ups’ for members of the oil producing alliance in the last few months,” Jadwa writes.
While Jadwa’s non-oil private sector composite index showed a dramatic fall in economic activity during Q2, more recent data
shows an improvement, with July’s non-oil PMI moving into expansionary territory for the first time since March of this year, the Riyadh-based bank said.
“On the fiscal side, although we recently raised our Brent oil forecast, due to Saudi Arabia’s commitment under the OPEC+ agreement (as well as further voluntary reductions), means we expect no material change in our forecasted government oil revenue of SR358 billion ($95 billion),” according to the report. “Since we expect government expenditure to hit budgeted levels of just over SR1 trillion for the year, our forecast for the Kingdom’s fiscal deficit also remains virtually unchanged at SR366 billion (13.4 percent of GDP) in 2020.”
[Click here to read the full report from Jadwa Investment] [Arabic]
