Riyadh – Mubasher: Capital Economics said Saudi Arabia’s economy is suffering heavily under the weight of fiscal austerity, with output contracting by around 2% year-on-year as of May.
The London-based economic research consultancy believes that IMF and consensus expectations for growth of more than 1% this year are inaccurate.
Saudi Arabian economy grew by 1.5% y-o-y in the first quarter of fiscal 2016, down from 1.8% y-o-y in Q4 of last year. The rise was attributed to the strong growth in the oil sector, while the non-oil sector shrank for a second consecutive quarter.
However, the Kingdom’s economy retreated by about 2% y-o-y in May, which can be partly explained by easing growth in the oil sector.
The research firm also sees that the fall in the non-oil sector seems to have worsened, noting that that output from the non-oil economy fell by around 4% y-o-y in May, which would represent the biggest decline since 1986 when non-oil output dropped by 5.8% over the year as a whole.
Capital Economics suggested that fiscal austerity in Saudi Arabia has made it the worst performing economy in the GCC, expecting a growth of 0.3% for 2015 as whole, which is below the consensus and IMF forecasts for growth of more than 1%.
