Feb 5, 2024 - Energy & Environment

Saudi Arabia's faltering growth shows oil's importance

Saudi Arabia annual growth estimates, by activity type
Source: The General Authority for Statistics; Chart: Deena Zaidi/Axios Visuals

One look at Saudi Arabia's latest growth figures explains why the Gulf giant has struggled mightily to boost global crude prices.

Driving the news: With oil prices capped despite widespread geopolitical turmoil, Saudi Arabia's growth turned grim in 2023, with gross domestic product tumbling by -0.9 percent, compared with 8.7 percent in 2022.

Why it matters: A core member of OPEC, the kingdom is one of the world's largest producers of crude, which plays a crucial role in its revenue picture. Oil accounts for 40 percent of Saudi's GDP, which saw a steep decline in oil activities.

  • Meanwhile, crude has shrugged off conflicts in the Middle East, with markets focused on worries about demand.

Catch-up quick: Rising supply from non-cartel economies including the U.S. — has steadily chipped away at OPEC's advantage in setting the global energy market agenda and is taking a toll on Saudi Arabia's economy.

By the numbers: The kingdom's oil activities included crude oil, natural gas and refining activities; that segment fell sharply, -9.2% in 2023, compared with a 15.4 percent increase in 2022.

  • The country saw a steep decline in oil activities from 6.1 percent in the fourth quarter of 2022 to -16.4 percent in the same quarter for 2023.
  • Real GDP decreased by 3.7% in the fourth quarter of 2023 compared with 5.3 percent growth in 2022, as non-oil activities and government activities grew by 4.3% and 3.1% respectively, on an annual basis.

Zoom out: The International Monetary Fund recently revised its estimates for the Middle East and Central Asia, attributing Saudi Arabia's lower oil production in 2024.

  • Saudi Aramco, the national oil company of Saudi Arabia, halted its oil expansion plan to limit maximum capacity at 12 million barrels per day — 1 million below the target announced in 2020.
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