Rising oil output supported a pick-up in growth in Saudi Arabia at the end of Q2 2018 with the economy set to perform better than most anticipate over the next 12 to 18 months, Capital Economics (CE) said in a new report.
"The Kingdom's GDP growth will accelerate over the coming quarters, as oil production is ramped up and looser fiscal policy filters through to the wider economy," the London-based consultancy noted.
The Saudi economy emerged from recession in Q1, recording an expansion of 1.2 percent year-on-year (YoY). While the growth plateaued in the first two months of Q2, the economy gathered momentum in June. Overall, growth averaged around 2 percent YoY in Q2, supported by increase in oil output.
Oil output jumped by 400,000 barrels per day between May and June. In YoY terms, oil output rose 3.8 percent in June compared with an average of 0.5 percent in the first five months of 2018, the report noted.
According to the report, non-oil sector activity remained "fairly subdued,” but private sector credit growth returned to positive territory in recent months.
Meanwhile, data on point of sale transactions and ATM withdrawals suggested that “the boost to consumer-facing sectors from a raft of public sector bonuses had run its course.”
Despite the government boosting infrastructure spending this year, the report said construction activity remained “weak,” based on cement production figures.
Capital Economics said it expects Saudi GDP to grow at 3.5 percent this year and 3 percent in 2019.
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