On November 1, preliminary data released by Saudi Arabia's General Authority for Statistics showed that the Kingdom's gross domestic product (GDP) contracted 3.8% year-on-year in the third quarter, marking a second consecutive quarter of decline and the first back-to-back negative growth since 2023. However, the pace of contraction narrowed from 4.7% in the second quarter. The eight-month-long conflict between the United States and Iran, along with military confrontation with Yemen's Houthi armed group, has severely disrupted Saudi oil production and exports, dragging down overall economic performance.
By sector, Saudi Arabia's oil sector economic activity shrank sharply by 20.4% year-on-year in the third quarter, an improvement from the 24.8% decline in the second quarter; the non-oil sector, meanwhile, grew 1.9% year-on-year, indicating that industries related to economic diversification still maintain a degree of resilience.
Due to restricted shipping through the Strait of Hormuz, Saudi Arabia has been transshipping some crude oil through a pipeline connecting eastern oil fields to a Red Sea export terminal, but the pipeline was briefly shut down after being attacked in September, further affecting crude oil exports. The third-quarter data does not yet reflect the subsequent recovery of Saudi crude oil exports to wartime highs.
Meanwhile, in October, the conflict between Saudi Arabia and the Houthi armed group further escalated, with missile and drone attacks disrupting flights at Riyadh airport and affecting commercial activity in the capital's financial district, gradually revealing the war's impact on non-oil industries. The International Monetary Fund (IMF) believes that Saudi Arabia's fiscal reserves and alternative oil export infrastructure help buffer the economic losses caused by the war. The Saudi government had previously projected that the economy would shrink 3.6% in 2026, with the fiscal deficit widening to 4.9% of GDP.
Comments