Saudi Arabia registers strong economic growth in 3rd quarter

Growth momentum in Saudi Arabia’s economy is moderating in the second half 2024, according to analysis conducted by S&P Global Market Intelligence.

According to the analysis the increased in oil production compared to the previous year ensures that annual growth in the third quarter is accelerating compared to the second.

Saudi real GDP grew by 2.8% year over year in the third quarter, according to provisional estimates from the General Authority for Statistics (GAStat). The rate marked the first positive year-over-year increase following four quarters of decline as restrictions on oil output adopted by Opec+ dampened headline growth since July 2023.

Compared to the second quarter, real GDP growth was still solid at 0.8% in the third quarter, but slowed down following stronger growth rates of 1.4% quarter over quarter in the first and second quarters of 2024. The oil sector has been driving quarter-over-quarter growth in the third quarter, with oil sector-growth at 1.3% outpacing the non-oil economy, which increased by 0.5%.

Softer non-oil growth is in line with the most recent PMI results for the third quarter, which signaled a slowdown of non-oil economic activity — the rebound of the index in September to 56.3 from 54.8 in August is unlikely to significantly change that picture, unless the higher value is confirmed in the final quarter.

The government’s review and rationalization of investment spending is having an impact on the economy, while the benign effect of lower interest rates, with the US Fed embarking on an easing mode in September, is not yet showing on private-sector investment growth. Consumer spending likely still posted solid growth in the third quarter, with inflation remaining subdued.

The provisional estimate confirms our expectation of an underlying growth moderation in the Saudi economy. Accelerating year-over-year growth, which is due mostly to oil sector-effects, should not be mistaken.

While softening, growth momentum still persists in the Saudi economy. Consumer spending in particular will likely remain solid as inflation is expected to stay modest. Private investment spending will increasingly join consumer spending as growth driver in the fourth quarter of 2024 and the first half of 2025 as interest rates are reduced further.

The oil sector will also continue to stimulate growth in the remainder of 2024 and 2025, but only very mildly. We currently anticipate oil production to edge up from an average annual production level of 9.0 million b/d in 2024 to 9.1 million b/d in 2025, assuming that OPEC+ will not follow through and increase production levels as affirmed in the latest meeting. Real GDP growth is expected to accelerate from 1.2% in 2024 to 2.9% in 2025.

Saudi Re posts profit: The Saudi Reinsurance Company “Saudi Re” has announced its financial results for the nine months ending September 30, 2024. The company achieved a net profit after zakat of SAR 475 million, marking an impressive increase of 351% compared to the same period last year. The financial results also highlighted a significant rise in total written premiums, which reached SAR 1.94 billion, up from SAR 1.55 billion in the corresponding period of the previous year, reflecting a growth rate of 25%.

The company experienced strong underwriting performance, with net insurance results in the third quarter reaching SAR 53.6 million, a growth of 88%. Net insurance results for the first nine months of 2024 stood at SAR 140.7 million, up 39% from the same period last year.

These positive financial results accompany several key developments that strengthen the company’s position in achieving its objectives and increasing its investments. Saudi Re realized capital gains of SAR 366 million (SAR 355 million after deducting the effect of the forward contract related to GBP) from the sale of its stake in Probitas Holding, underscoring the company’s robust performance in investments and enhancing its cash flow.

Ahmed Al-Jabr, CEO of Saudi Re, stated that the company maintains a sustainable growth trajectory and enjoys a solid financial position, with a distinguished credit rating of -A from Standard & Poor’s and A3 from Moody’s. He explained that, with promising opportunities ahead, the company aims to redirect the proceeds from the Probitas sale to develop new growth opportunities, particularly in the Saudi market, in light of the evolving regulatory landscape and increasing demand for insurance services.

Furthermore, Saudi Re has signed several agreements, including a reinsurance contract with the AL Etihad Cooperative Insurance Company, providing coverage against employer’s default valued at SAR 208 million. The company also announced the renewal of a one-year reinsurance contract with Probitas Corporate Capital valued at £33.5 million, which will enhance its competitive capabilities and expand its operational scope in the market.

Agencies