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Saudi Arabia's GDP grew by 3.4% in the first quarter, exceeding flash estimates

Saudi Arabia's economy grew more than anticipated in the first quarter 2025, according government data estimates. Lower oil prices had a less significant impact on the economy than originally forecast.

The Saudi General Authority for Statistics released a flash estimate of 2.7% in May. This was a significant improvement over the initial estimates.

Monica Malik is the chief economist of Abu Dhabi Commercial Bank. She said that "the upward revision" was due to both a smaller contraction in the oil sector each year and a stronger growth in private sector.

Initial estimates showed a contraction of 1.4%.

The non-oil sector grew by 4.9%, compared with estimates made last month that indicated a 4.2% rise.

Increased oil production in the Kingdom may have blunted the impact of lower oil price.

Riyadh faces an increasing budget deficit. The International Monetary Fund says that Riyadh requires oil prices above $90 per barrel for its books to be balanced. Prices of $60 per barrel were the norm in recent weeks.

Saudi Arabia, the largest oil exporter in the world, lowered the price of its July crude oil for Asian buyers beginning of June after the Organization of the Petroleum Exporting Countries (OPEC+) increased output for a forth month.

OPEC+ has agreed to a further big increase in output of 411,000 bpd, after increasing output by the same amounts in May and June.

Saudi Arabia has embarked on a costly transformation program called Vision 2030, which aims to wean its economy off of oil dependence. It has also been investing billions in massive new development projects.

The Financial Times reported that in May, Saudi Finance Minister Mohammed Al-Jadaan stated the kingdom would take stock of its priorities as a result of a decline in oil revenues.

Malik said that he expects to see a reduction in government spending, to reduce the growing fiscal deficit. This will also likely have an impact on the non-oil sector's growth.

Daniel Richards is a senior economist with Emirates NBD. He said the bank still believes that spending levels will continue to be high.

He wrote that there are still enough projects in progress to support growth at least through this year and the next.

Saudi Arabia has committed to hosting a number of large international events. Each event will require significant expenditure on construction and development.

The 2029 Asian Winter Games will feature artificial snow, a freshwater lake created by man, and the World Cup in 2034, where 11 new stadiums and some renovated ones will be constructed.

Saudi Arabia's fiscal deficit in 2025 is expected to be around 101 billion Riyals ($27 billion). Pesha Magd is reporting; Toby Chopra is editing.

(source: Reuters)