GDP growth records best reading since Q4 2022 in the fourth quarter

GDP growth hits two-year high: According to a preliminary reading, year-on-year GDP growth improved to 4.4% in the final quarter, up from 2.8% in the third quarter and marking a two-year high. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed markedly to 0.3% in Q4 from the previous quarter's 0.9% increase, marking the softest expansion in a year.

Low base of comparison tees up oil sector growth: The acceleration in year-on-year GDP growth was driven by the oil sector, which expanded 3.4%, the sharpest pace since Q3 2022 (Q3: 0.0% yoy). This was due to a more favorable base of comparison, with the sector shrinking at the fastest pace in a year in seasonally adjusted quarter-on-quarter terms; crude petroleum production fell by nearly a fifth in Q4 2023 as a result of OPEC+ output curbs. Looking at other sectors, non-oil output rose 4.6% (Q3: +4.3% yoy), a rate above pre-pandemic levels—demonstrating that the government’s push to diversify the economy is bearing fruit—but one of the weakest figures in the last four years, suggesting that the recovery from the Covid-19 pandemic is nearing completion. Finally, government spending increased 2.2% (Q3: +3.1% yoy).

GDP growth to pick up: Our panelists expect annual GDP growth to rise further in Q1 2025, reaching the highest level since Q4 2022. The oil sector will continue to benefit from a favorable base of comparison, while the non-oil private sector will be aided by lower interest rates and the government’s continued diversification drive. That said, OPEC+ decided in December to delay hiking crude oil output to April, instead of January as originally planned, weighing on the oil sector. Further delays are a downside risk to GDP growth.

Panelist insight: EIU analysts said: “It is now likely to be late 2026 at the earliest before Saudi Arabia's existing 1m-barrel/day voluntary curb on oil output is fully unravelled. This has implications for the country's economic growth rate; EIU now expects real GDP to expand by 3.4% in 2025, down from our previous forecast of 4.8%, with growth accelerating to 4% in 2026, up from our previous forecast of 2.9%.”

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