Recent growth figures from Saudi Arabia underscore the challenges faced by the Gulf nation in its efforts to boost global crude prices. Despite geopolitical unrest, oil prices remain capped, contributing to Saudi Arabia’s economic struggles, as revealed in its grim 2023 growth statistics. The gross domestic product (GDP) of the kingdom plummeted by -0.9%, a stark contrast to the 8.7% growth recorded in 2022.
As a key member of OPEC and one of the world’s leading crude producers, Saudi Arabia heavily relies on oil revenue, constituting 40% of its GDP. The decline in oil activities has further exacerbated the economic downturn, with markets showing resilience to conflicts in the Middle East and instead focusing on concerns about global demand.
Notably, the rise in oil supply from non-OPEC nations, including the United States, has eroded OPEC’s influence in shaping the global energy market, impacting Saudi Arabia’s economy. In response, the kingdom has pursued economic diversification, emphasizing tourism to stimulate growth.
Saudi Arabia, ranking among the top three petroleum producers globally alongside the U.S. and Russia, witnessed a significant decline of -9.2% in its oil activities in 2023, compared to a substantial 15.4% increase in 2022. The overall economy contracted by 0.9% in 2023, marking a downturn from the 8.7% growth observed in the previous year, according to estimates by the General Authority for Statistics.
Specifically, the kingdom’s oil sector, encompassing crude oil, natural gas, and refining activities, experienced a sharp decline from 6.1% growth in the fourth quarter of 2022 to -16.4% in the same quarter of 2023. Real GDP also saw a decrease of 3.7% in the fourth quarter of 2023 compared to the 5.3% growth recorded in 2022, with non-oil and government activities growing by 4.3% and 3.1%, respectively, on an annual basis.
Zooming out, the International Monetary Fund has revised its projections for the Middle East and Central Asia, attributing Saudi Arabia’s anticipated lower oil production in 2024 to ongoing challenges. Additionally, Saudi Aramco, the national oil company, has scaled back its oil expansion plan, capping maximum capacity at 12 million barrels per day, a million barrels below the target set in 2020.