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• The decrease in real GDP was mainly attributed to a significant drop of 16.4 percent
• Saudi Arabia, the world's largest crude exporter, has been pursuing a transition away from fossil fuel.
• Aramco announced its decision to abandon plans to increase its production capacity to 13 million bpd by 2027.

Saudi Arabia’s economy faced a contraction of 3.7 percent in the fourth quarter of 2023 compared to the previous year, primarily driven by a decline in oil revenue, as reported by the government’s statistics agency on Wednesday.

The decrease in real gross domestic product (GDP) was mainly attributed to a significant drop of 16.4 percent in oil-related activities, while non-oil activities and government activities demonstrated resilience, growing by 4.3 percent and 3.1 percent, respectively, on an annual basis.

These preliminary estimates were released by the government’s General Authority for Statistics.

Saudi Arabia, the world’s largest crude exporter, has been actively pursuing a transition away from fossil fuels in alignment with Crown Prince Mohammed bin Salman’s Vision 2030 reform agenda.

This ambitious initiative seeks to reposition Saudi Arabia as a prominent tourism, business, and sports destination.

Fall in oil prices hurt Aramco 

Oil giant Saudi Aramco, in which the government holds a 90 percent stake, had reported record profits in 2022, driven by the surge in oil prices triggered by Russia’s invasion of Ukraine.

However, the subsequent drop in oil prices throughout the past year, coupled with a series of supply cuts initiated in October 2022, has resulted in Saudi Arabia’s daily oil production hovering around nine million barrels per day, significantly below its capacity of 12 million bpd.

In a recent development, Saudi Aramco announced its decision to abandon plans to increase its production capacity to 13 million bpd by 2027.

Analysts have speculated that this decision may reflect uncertainties surrounding future market demand.

Looking at the entirety of 2023, real GDP, adjusted for price changes, saw a decline of 0.9 percent compared to the previous year, according to the statistics authority’s latest update.

In December, the finance ministry had projected a modest real GDP growth of just 0.03 percent for 2023 and a more optimistic 4.4 percent growth forecast for the current year.

The ministry also anticipated a budget deficit of 2.0 percent of GDP in 2023 and a slightly reduced deficit of 1.9 percent of GDP for the current year, reflecting increased government spending and decreased oil revenue.

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