• Saudi Arabia's GDP dipped 0.3% in Q2 2024 due to an 8.9% drop in oil activities.
• Despite oil sector challenges, the economy showed resilience with a 1.4% growth in real GDP.
• The non-oil sector expanded by 4.9%, driven by gains in financial, insurance, and business services sectors.
• Government activities and infrastructure development also saw a rise, indicating positive contributions to economic growth.

Saudi Arabia's real gross domestic product (GDP) experienced a slight dip of 0.3% year-on-year in the second quarter of 2024, according to a recent report by the country's General Authority for Statistics. The primary cause of this decline was an 8.9% year-on-year drop in oil activities during the same period. The oil sector, a significant pillar of the Saudi economy, faced a downturn following the Kingdom's decision to align with OPEC+ agreements and reduce crude output.

However, despite the challenges in the oil sector, the Saudi economy demonstrated resilience. The report highlighted a 1.4% growth in the kingdom's seasonally adjusted real GDP compared to the previous quarter. This growth indicates a degree of economic stability and adaptability in the face of sector-specific challenges.

Non-Oil Sector Fuels Growth

Interestingly, the non-oil sector in Saudi Arabia showed robust performance, expanding by 4.9% year-on-year. This growth was primarily driven by gains in the financial, insurance, and business services sectors, which surged by 7.1% in the second quarter compared to the same period last year. The non-oil sector also saw a 2.1% rise compared to the previous quarter, reflecting the Kingdom's efforts to diversify its economic base and reduce its reliance on oil revenues.

This upward trend in non-oil activities aligns with Saudi Arabia's Vision 2030, a strategic plan aimed at transforming the country's economy by fostering growth in various sectors and reducing dependence on oil revenues. The growth in the non-oil sector is a testament to the success of this vision and the country's ongoing efforts to broaden its economic base.

Government Activities and Infrastructure Development

Government activities also saw a rise, with a 3.6% year-on-year increase. This suggests that public sector investments and initiatives are contributing positively to the country's economic growth. Among the various sectors, electricity, gas, and water activities achieved the highest growth rate in the second quarter, hitting 8.9% year-on-year. This significant growth indicates a strong push in infrastructure development and utilities, suggesting that the country is actively investing in and expanding its energy and water supply infrastructure.

However, it's worth noting that the overall GDP levels in Q2 2024 remain below those seen in the first half of the year. This could be attributed to economic uncertainty and challenges related to the cost and availability of finance, as reported by the Bank of England Monetary Policy Report.

While the decrease in Saudi Arabia's real GDP in Q2 2024 is a cause for concern, the country's efforts to diversify its economy, as outlined in Vision 2030, seem to be bearing fruit.