Saudi Arabia's GDP rises on the back of oil growth

Saudi Arabia's economy has been booming in recent times and the country's wealth is on the rise. Economic experts affirm that the nation's rate of growth is much higher than it was a decade ago, and this is mainly due to the country's oil activity. Thanks to the increase in this sector, the country's GDP has reached historic highs.

GASTAT, the General Authority of Statistics, in its latest report states that the nation's Gross Domestic Product has increased by 9.6% during the first three months of 2022. This is a considerable growth, as the previous year's figure was not so high.

The country's oil activity is one of the mainstays of the national economy. The nation is the world's largest exporter of this hydrocarbon and is also a member of the Organisation of Petroleum Exporting Countries (OPEC), which means that a large part of its profits come from these transactions. Even so, this boom in GDP from this economic activity is largely due to the conflict in Ukraine. 

Russia, like Saudi Arabia, is one of the world's largest oil exporters. Because of its invasion of Ukraine and the war it is provoking, most Western powers are responding with a blockade of the Russian country, so its products are going nowhere.

Therefore, those powers that have decided not to depend on Russian energy resources have started to look for alternatives. Those that did not trade with Saudi Arabia have begun to do so, and as a result the country's GDP is reaching very significant figures for the national economy.

This increase is a historic figure, as there has not been an increase in energy prices since the 1973 oil crisis. As a result of the Gulf countries cutting off energy supplies, global patterns of trade, production and consumption were altered. Now, in 2022, oil activities in the Kingdom have increased by a further 20.4% compared to last year's figures.

It is worth noting, however, that it is not only this activity that has seen an upward trend. Non-oil activities and public services have also seen their profits increase, registering a 3.7% and 2.4% increase, respectively.

This is because there has been an expansion of new businesses and new activity as a result of the pandemic. The ravages of the coronavirus have led to a surge in demand from new customers and, as a result, new forms of economic activity are emerging.

Another factor that has led to the growth of non-oil activity is the Vision 2030 programme. Saudi Arabia aims with this plan to establish a strategic framework that will reduce dependence on oil in the national energy mix. This will lead to further diversification of the economy and the development of other industries in the country.

GASTAT indicates in its report that compared to the last quarter of 2021, Saudi GDP has grown by around 2.2% more in the first months of the year. For their part, hydrocarbon-related activities have experienced an increase during these periods of 2.9%, while non-oil activities have registered a rate of 2.5% more. Governmental activities also decreased by just over 0.9%. 

Depending on the duration of the conflict in Ukraine, as well as the sanctions and blockades imposed against Russia, Saudi Arabia would be left almost entirely with this market, so prices could rise further and the nation's GDP would continue to register very high figures. As a result, production would be much higher and therefore sales would be the same.

However, the GDP is expected to continue on this trend for the next few years. Even if the war ends soon, the consequences are already there and are starting to show. The World Bank in its latest report confirms that energy prices will continue to rise by more than 50% this year. Even so, the situation is expected to start to ease from 2023 and 2024.