Jadwa Investment: Consumption remains the driver of the non-oil Saudi economy

Jadwa Investment said that official estimates of Saudi Arabia’s actual gross domestic product show significant growth in non-oil economic activity in the second quarter of 2023, as non-oil activities expanded by 6.1% on an annual basis, up from a revised rate of 5.4% in the first quarter of 2023. .

The sharp decline in oil production had a significant impact on economic output as a whole, and the additional cuts in oil production imposed by the OPEC+ alliance led to a decline in the actual gross domestic product of the oil sector by 4.3%, on an annual basis, according to the “Jadwa” report, today, Tuesday. .

Jadwa continued: “This decline was enough to push overall GDP growth to 1.2% in the second quarter, which is the weakest quarterly growth since the first quarter of 2021, which witnessed the outbreak of the Covid-19 pandemic.

Despite this weak GDP figure, the focus will be on the strength of the local economy, according to Jadwa, who added that consumption remains the driver of non-oil GDP, benefiting from the growth of female participation in the workforce, the enhancement of financial inclusion and the prosperity of the tourism sector. .

Hajj, in particular, was strong this year, as the number of pilgrims abroad reached about 1.66 million pilgrims, which is equivalent to double their number last year, which reached 781,000 pilgrims. Although this number is still slightly lower than pre-Covid-19 levels, foreign pilgrims have become They stay for longer periods within the Kingdom, which enhances hospitality and retail activities.

Jadwa adds: “On the investment side, investment in “mega projects” has intensified, as the percentage of contracts awarded in the first half of 2023 reached about 73% of the total number of contracts in 2022, while the value of contracts under implementation reached $331 billion. , higher by a third than the previous year, according to “Med” magazine.

Looking at GDP by sector, the “Transportation, Storage and Communications” sector registered the largest gains, year-on-year, expanding by a whopping 12.9% and pushing average quarterly actual growth to 9.7% for the past 6 quarters.

Jadwa adds: “Transportation was enhanced through the expansion of public transportation, which was necessary to transport larger numbers of tourists throughout the country, while logistics services related to supporting the growth of wholesale and retail trade gave a strong boost to the sector.”

The “communications” segment also found support from the continued spread of broadband technology. However, the rapid growth that the sector has witnessed recently should be put into perspective, and the sector’s production was only 4% greater than it was in the first quarter of 2020, before it led The Corona virus has frozen many transportation activities.

The largest actual gains in terms of overall GDP came from the “wholesale and retail trade, restaurants and hotels” sector, which grew by just under 10%, contributing more than a third of the change in the non-oil sector’s GDP, according to Jadwa.