Saudi Arabia is in recession in 2023, this is confirmed by statistics published by the state administration on January 31. GDP fell by 0.9% during the year as a whole. How can we explain this breakdown of the petromonarchy in full transition?
The International Monetary Fund (IMF) notes that Gulf heavyweights rarely experience such weakness. In 2023, Saudi Arabia A country still mired in a debt crisis achieved the worst performance of the G20 countries, after Argentina. What is the contrast with 2022?
Its growth increased by 9%, then it was the champion of the G20 category. That was when oil prices were skyrocketing to an average of over $100 per barrel due to the war in Ukraine. In 2023, this average suddenly drops to $87. And immediately the state’s economy shrinks.
Petro-dependent
The years follow one another and are the same in the petromonarchy: more of him Oil production is stronger, the stronger its growth, the two curves are always twins. However, in 2023, the OPEC leader drastically cut production, as did other members of the cartel under his leadership, hoping to revive the crude oil boom. Because in order to balance its accounts and finance Prince Mohammed bin Salman’s 2030 Vision projects, Saudi Arabia needs $108 a barrel, according to Bloomberg agency calculations.
But in 2023, this objective remained out of reach. Because demand has weakened and especially because additional supplies from the United States, Brazil and Guyana have largely compensated for the slowdown in OPEC flows. The Gulf’s richest country is therefore experiencing a technical, and perhaps temporary, recession controlled by the oil sector.
Diversification of the economy in the medium-term
The non-oil sector was prosperous last year. Its turnover increased by 4% while hydrocarbon turnover decreased by 16%. But he is not powerful enough to take over. The oil-related industry still represents 40% of GDP, up from 45% in 2012.
Projects abound in green energy, mining, sports, tourism, health, electric vehicles and the new town of Neum. But the transition process is moving slowly and its fruits are yet to be seen. The implementation of the Vision 2030 plan is halfway done. And despite the recession, the government wants to continue the investment effort.
Essential Oil Windfall
It is still oil that finances the transformation of the economy. The government owns 90% of the shares of Aramco, the national company that exploits oil, and the sovereign fund is very active in the transformation of the economy with 8%. The world’s first listed company with a capitalization of 2 trillion dollars is the goose that lays the state’s golden eggs.
A company that pays huge dividends even when prices are depressed, as in 2023. Dividends were $29 billion in the second quarter, then the third quarter. sufficient to finance both the public deficit and the investment component.
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