Saudi economy sees pick up after pandemic contraction

LONDON: Economic activity picked up in Saudi Arabia in the third-quarter according to data released on Tuesday.

The economy grew by 1.2 percent on a seasonally adjusted quarter-on-quarter basis in the third quarter compared to a contraction of 4.9 percent in the previous quarter, the Kingdom’s General Authority for Statistics said.

However when compared to a year earlier, the Saudi economy shrank by 4.2 percent, which represented an improvement on the previous three months when business was forced to a near standstill because of pandemic-related lockdowns.

For the first time, the General Authority for Statistics has published what it calls “flash estimates” for quarterly GDP performance in an effort to provide more timely data about how the economy is faring. The aim is to disseminate such information more quickly at the end of each quarter.

“A sequential pickup in economic activity was expected in the third quarter with the easing of lockdown measures and given the pent-up demand,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told Reuters. “However, the pace of recovery would have been dampened by the increase in the VAT rate.”

The Kingdom tripled its value added tax to 15 percent earlier this year in response to the double blow of the pandemic and the collapse of the oil price.

The pickup in the Saudi economy comes amid improving global economic sentiment linked to news from Pfizer and BioNTech, which reported that their COVID-19 vaccine had been found to be more than 90 percent effective in a late stage trial. That helped to propel stock markets to record gains worldwide as the price of oil also climbed on the renewed optimism.

Gulf markets extended their gains on Tuesday to finish higher for a second consecutive session. Saudi and Abu Dhabi shares both finished about 0.5 percent higher while Dubai’s main measure gained 2 percent. Elsewhere in the Middle East, Egypt’s EGX30 index also climbed 2.2 percent.