The Central Department of Statistics in KSA announced that the Kingdom’s real GDP growth strengthened to 5.9% year-on-year in the third quarter of 2012, up from an annual rate of 5.5% recorded in the previous quarter. The growth rate in the third quarter of 2012 was higher than the 5.4% foreseen by EFG-Hermes.
The acceleration is attributable to sharply stronger government activity which increased by 12.2% year-on-year in real terms during the third quarter of 2012, pushing real non-oil growth to 7.4% (from 5.5% year-on-year in the second quarter of 2012). Both real oil and private sector growth decelerated in the third quarter of 2012.
Importantly, the data shows that sectors related to investment and consumption remained robust. Indeed, the construction, transportation, utility and retails sectors all saw real expansion of over 7.0% year-on-year in the third quarter of 2012. EFG-Hermes highlighted that along with the government’s investment program, it sees a deepening demand environment which is supporting wider investments.
EFG-Hermes maintained its 2012 real GDP growth forecast despite the stronger third quarter outturn. Real GDP growth has averaged 5.7% year-on-year in the first nine months of 2012, marginally above EFG-Hermes’ forecast of 5.6% for the whole of 2012.
There would be some softening in government activity in the fourth quarter to more normalized levels; however, there would be a pick-up in private sector activity. Real non-oil GDP would remain robust at 5.0% in 2013, with a continued expansionary fiscal stance.
Mena Weekly Monitor – Bank Audi Research