The National Commercial Bank (NCB) said in its new report that last year marked the slowest economic growth rate since 2009, and the Kingdom will face a moderate business cycle during 2014 and 2015, growing around 4 percent. In 2013, growth in aggregate output, real GDP, decelerated to 4 percent, mainly against the backdrop of the negative contribution from the oil sector, stemming from a lower production level. Saudi oil output fell by around 1.6 percent in 2013, averaging 9.64 million bpd, which weighed negatively on the oil sector GDP that declined by 1 percent, the largest contraction since 2009.
Nevertheless, the report said contraction in the oil sector was more than offset by nonoil GDP growth that grew by around 5.4 percent. Importantly, the nonoil private sector increased by 5.97 percent Y/Y, driven by construction, trade, and manufacturing. The economic growth outlook for 2014 will continue to be driven by nonoil growth, with oil maintaining its negative contribution. The bank projects real GDP growth of 4.3 percent for 2014 due mainly to the nonoil sector maintaining last year's pace of 5.4 percent, driven by the private sector, mainly manufacturing and construction.
The nonoil sector will be the driving force for economic growth in 2014, remaining above the 5 percent threshold for the third year in a row. Real nonoil GDP in 2013 grew by around 5.4 percent, largely driven by the stellar performance of the non-oil private sector. The NCB Saudi Economic Perspectives report said private sector maintained its significant contribution to real GDP at 58.9 percent, growing by 5.97 percent, which illustrates the vibrant role that private enterprises are assuming in the Saudi economy. The main drivers of private sector growth were the construction, retail, and the manufacturing sectors, which posted 8.8 percent, 6.6 percent and 5.3 percent annual growth, respectively.
This vibrancy of the private sector emanated from the enhanced business confidence and the improved financing environment. Evidently, the growth in commerce and manufacturing benefited from the pickup in credit, receiving SR28.7 billion and SR13.6 billion, respectively, in incremental loans and advances from banks in 2013, which represents an annual increase of 14 percent and 10.7 percent. The boost to business confidence underpinned the value of awarded construction contracts that registered an all-time high. One of the promising growth drivers for corporate Saudi is nonoil exports that reached a historical $54.1 billion last year and that will gain momentum, along with domestic demand, given the vertical and horizontal diversification plans that will enhance the absorptive capacity of the economy.