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02/10/2017 - 14:00hs
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Saudi GDP shrank in Q2

Economy declined 2.3% from April to June over the year’s first three months, impacted by the budget cuts done due to oil’s lower prices.



Mikhail Voskresenskiy/Sputnik/AFP

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São Paulo – Saudi Arabia’s economy registered a decline from April to June of this year for the second consecutive quarter, according to information published this weekend by the website Gulf Business, based on data from the General Authority for Statistics. The Gross Domestic Product (GDP) decreased 2.3% from April to June over Q1, following an even sharper drop, from 3.8% from January to March over 2016’s last three months.

The recession occurred mainly due to the oil sector, impacted by the product’s low prices in the global market in the last three years. The lower prices of the commodity impacted the public sector, which has been implementing austerity measures to contain the budget’s deficit.

Saudi Arabia has its economy based on the oil sector. The country is the world’s largest oil exporter, with the product accounting for the majority of the budget and exporting revenues. The price of the Brent oil dropped from over USD 100 in early 2014 to a little more than USD 40 at the end of last year and opened this Monday (2) costing around USD 57.

At this time, although oil prices are improving, Saudi Arabia cannot increase its output since the Organization of Petroleum Exporting Countries (Opep) has agreed to slash production as it waits for prices to go up. The agreement is effective through March 2018, but it’s liable to extension at a meeting this year. 

The Saudi oil industry shrank by 1.8% year-on-year in Q2, with private sector showing 0.4% growth. At this rate, the economy could shrink this year for the first time since the 2008 financial crisis. The International Monetary Fund (IMF) forecasts 0.1% GDP growth in 2017, down from 1.7% in 2016.

Gulf Business said the government is planning to launch a stimulus package in Q4, with actions designed to encourage investment and private sector growth. Next year, a value-added tax should be put in place, and authorities are considering increasing domestic fuel prices. 

*Translated by Sérgio Kakitani & Gabriel Pomerancblum

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