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Despite the extension of the oil production cuts, Saudi Arabia is set to keep the growth momentum in its non-oil sector, which accounts for around 60% of GDP, a senior economist at the International Monetary Fund (IMF) told Bloomberg in an interview.
On Tuesday, Saudi Arabia said it would extend its 1 million barrels per day (bpd) cut through December. The move reinforces “the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets,” the Kingdom says. The cuts, which mean the Saudis will pump 9 million bpd until the end of the year, will be reviewed monthly to consider deepening the cut or increasing production, depending on the state of the market.
While oil exports from the world’s top crude oil exporter are falling, the non-oil economy in the Kingdom is faring well and will do so in the near term, Amine Mati, the IMF’s mission chief for Saudi Arabia, told Bloomberg.
“We do expect the non-oil growth momentum — at least for 2023 and 2024 — to continue,” Mati said.
Saudi Arabia’s economy is set to markedly slow down this year from last year’s 8.7% growth due to the oil production cuts the world’s top crude exporter is implementing in a bid to “stabilize the market.”
But non-oil growth is set to support the economy, the IMF said on Wednesday. Real GDP growth is seen at 1.9%, while non-oil real GDP growth is expected at 4.9% this year. Next year, the Kingdom’s real GDP growth is projected at 2.8% and non-oil real GDP growth is set for a 4.4% increase, according to the IMF’s latest estimates.
“On the downside, lower oil prices due to subdued global activity represent a key short-term risk while a quicker shift in demand for fossil fuel could hamper growth in the medium to long term,” the IMF said.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com