巴黎银行-新兴市场-石油与天然气行业-沙特阿拉伯：石油限制削弱了经济增长-20190703-7页_922kb

Saudi Arabia – Oil Constraints Weaken Economic Growth

Core Content Summary

This document provides an economic analysis of Saudi Arabia's first-quarter 2019 GDP performance and forecasts for the full year. It highlights the impact of the oil sector slowdown on the country's overall economic growth, as well as the limited effectiveness of expected monetary policy measures in offsetting these constraints.

Key Messages

• Oil Sector Slowdown: The slowdown in the oil sector was the main driver of Saudi Arabia's real GDP deceleration in Q1 2019.

  • Oil output constraints, imposed by OPEC+ in January-March 2019, led to a sharp decline in mining activity, from 6.41% growth in Q4 2018 to just 1.03% in Q1 2019.
  • The oil sector still accounts for about 42% of the real economy, despite the country's efforts to diversify.

• GDP Performance:

  • Saudi Arabia's headline GDP growth in Q1 2019 was 1.66% y/y and -1.94% q/q, reflecting the drag from the oil sector.
  • The non-oil sector showed some resilience, with real estate activity expanding by 4.8% in Q1 2019, up from 1.64% in the previous quarter.
  • Construction activity also rebounded, moving from a sharp 3.4% contraction in Q4 to growth of 1.3% in Q1.

• Government Spending Impact:

  • Government spending rose by 8% y/y in Q1 2019, driven by a 12% increase in capital expenditure (capex).
  • This underscores the continued reliance of the construction and real estate sectors on government funding and oil-related revenues.

• Growth Forecast:

  • The document forecasts a lower full-year real GDP growth for 2019, revised from 2.4% to 1.7% y/y.
  • The slowdown in oil output is expected to persist for the rest of the year, and the likely two 25bp rate cuts will not be sufficient to offset this drag.

• Monetary Policy and Global Factors:

  • The Saudi Central Bank is expected to cut rates twice in 2019 (in July and September), following the U.S. Federal Reserve's moves.
  • However, the report suggests that rate cuts may not be enough to stimulate growth, as the oil sector remains a major constraint.

Market View

• Global Rate Trends: Lower global interest rates are seen as a key factor influencing GCC local rates and sovereign credit.
• Monetary Easing: The report expects further monetary easing in the region, with the Saudi Central Bank likely to follow global trends.
• Forward Rates: Local forward rates have fallen below the current policy rate, indicating market expectations of future rate cuts.

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• Non-Independent Research: This document is considered non-independent research under UK MiFID II rules and is intended as a marketing communication.
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• Risk Disclosure: The document contains risk-related information, and users are advised to consult independent professionals before making any investment decisions.
• Performance Data: Any performance data included is based on back-testing and simulations, and is not indicative of future results.
• Regulatory Compliance: The document is distributed in accordance with local regulations and is only intended for "Relevant Persons" as defined by MiFID II and other applicable financial laws.

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Conclusion

The document emphasizes that while the non-oil sectors showed some growth in Q1 2019, the oil sector's continued weakness is expected to significantly impact the country's full-year GDP growth. The Saudi Central Bank's rate cuts are anticipated but may not be enough to counteract the ongoing oil output constraints. The report serves as an economic outlook and market analysis, with clear disclaimers regarding its non-independent nature and intended audience.