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Where is Saudi’s GDP headed?
After years of exponential growth, Saudi Arabia's GDP will likely contract by 1 percent in 2009, says Jeddah-based NCB.
July 30, 2009 8:17 by Khalil Hanware
Saudi Arabia is still dominated by the oil sector. In 2008, the oil sector accounted for about 32 percent of real GDP. Oil export revenues represented about 90 percent of total exports and government revenues. Oil also plays an important role in supporting other major industries, such as petrochemicals, steel, aluminum, power generation, water desalination and other energy-intensive industries.
Saudi Arabia is therefore vulnerable to the recent negative oil price shock, which brought down Arab light prices from a high of $142 a barrel in mid-2008 to an average of about $53 a barrel so far in 2009.
“With substantially lower oil prices and reduced production level, oil revenues are expected to fall by over half in 2009. This will have adverse implications for the economy’s fiscal and external positions,” Said Al Shaikh, chief economist at NCB, said.
Moreover, real oil GDP will contract by around 8 percent in 2009, and so the sector’s contribution to overall economic growth will be unarguably negative. In 2010, the contribution of the oil sector to economic growth should turn positive but will remain modest, as Saudi crude oil production is expected to increase by an average of only 400,000 barrels per day.