Steep decline in oil prices and the current coronavirus pandemic had a negative impact on Saudi Arabia's economy; which contracted by 1 percent in the first quarter, official data showed on Tuesday. "The negative growth originated mainly from the contraction in the oil sector by 4.6 percent. While the non-oil sector recorded a positive growth rate of 1.6 percent," the General Authority for Statistics said, Reuters reported.
Saudi Arabia is facing an economic decline this year as the coronavirus pandemic dampened global crude demand. Moreover, virus containment measures hurt the Kingdom's non-oil economy.
"The coronavirus crisis means that this is somewhat old news and the figures for Q2 will almost certainly be terrible," James Swanston, MENA economist at Capital Economics, was quoted as saying in the Reuters report.
In the first quarter, the value of Saudi Arabia's oil exports plunged by about $11bn year on year; and in April alone the drop was of about $12bn, official data showed this month.
Sharp production cuts in May and June, aimed at lifting oil prices, are likely to weigh further on oil GDP in the second quarter, and figures released by the central bank this week showed the non-oil economy continued to suffer in May.
Profits for the banking sector posted an annual decline of nearly 40 percent in May. Also, points of sale transactions were down by nearly 16 per cent, according to Saudi Arabian Monetary Authority data.
"Lockdown measures and weak confidence continued to take a toll on spending," said Dubai-based Arqaam Capital, which estimated consumer spending fell by 32 percent year on year last month after a 35 percent decline in April.
Hoping to raise non-oil revenues, the government has ordered an increase in value-added tax; however, this is likely to dampen consumer spending and slow down economic recovery; as measures to contain the coronavirus are lifted, economists have said.
The International Monetary Fund estimates Saudi Arabia's economy will shrink by 6.8 percent this year.