File photo of old Okaz Market in Taif, near Mecca, Saudi Arabia (Asharq Al-Awsat)
Jadwa Investment–a Saudi Closed Joint Stock Company with headquarters in Riyadh–said growth was the weakest since the first quarter of 2011. It added that “the slowdown has been spread evenly across most sectors, where one sector–the government services sector–recorded faster growth than in the fourth quarter of last year.”
Jadwa pointed out that all economy sectors had seen growth in the last few years except the oil sector. Jadwa said: “The non-oil private sector has been the driving force behind growth in the first quarter, contributing by 2.6 percent. The contribution of the public sector rose by 0.9 percent in the first quarter, compared to 0.5 percent in the previous quarter. The oil sector dropped to 1.4 percent, due to a drop in oil production.”
Jadwa added that “the first quarter witnessed an overall non-oil sector growth of 4.4 percent compared to 6.1 percent the previous quarter, and 4.8 percent for the corresponding quarter of last year. Despite the fact that the non-oil private sector, represents the driving force behind the non-oil sector, its contribution and growth level returned to their normal level, where the effect of the financial incentives launched by the government in 2011 has slowed down gradually.”
It added that: “The growth in the non-oil private sector reached 4.3 percent compared to 5.1 percent last year, and is expected to maintain the current growth rate supported by the level of demand domestically, and the increase in banking loans and private sector investments.”
According to Jadwa’s report, the non-oil public sector has recorded a growth rate of 4.9 percent based on annual accounts, thus achieving the highest growth rate among all sectors in the first quarter, aided by the recovery of the public services sector, which grew by 5.7 percent. The report said: “The government services sector contribution to overall economy growth is expected to remain strong for the rest of the year, because recent reforms in the labor market and the implementation of the new labor law will lead to an increase in demand for government services. This growth is expected to be reflected in the form of an increase in non-oil revenue, which supports the state budget.”
The report also pointed out that the oil sector had contracted by 6.3 percent, the lowest quarterly figure since data became available in 2010. This figure has been affected by change in the oil production volume, which contracted by 7.9 percent during the same period. The oil sector contribution to actual GDP has contracted to 19.6 percent, compared to 21.3 percent last year. The report said: “Because oil production is expected to increase gradually in the summer months due to increased local demand, the negative effect of the reduction in oil production on GDP will decline in the following quarters.”
Jadwa added: “Despite the fact that most sectors have recorded positive growth based on annual comparison in the first quarter, its performance was mixed as expected. The wholesale and retail sector has led the table of fastest growing sectors with 6.9 percent, even if it was at a slower pace compared to the last three quarters. The retail sector will probably maintain a strong growth in the coming quarters. This is indicated by the increase in cash withdrawals from ATMs, and in the number of transactions at points of sale (POS) in the period between the start of the year until May.”
The company’s analysts say that the kingdom’s construction sector remains buoyant, with 6.7 percent growth in the previous quarter, an improvement on last year.
It said: “This is due to a growth in the construction activity of infrastructure, commercial property development, and increasingly, housing projects. The huge sums allocated by the government to the housing sector to meet the increase in demand, is expected to maintain the construction sector as one of the fastest growing sectors in the next few years.”
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