Oil Production Cuts takes a Toll On Saudi Arabia’s Economy

Saudi Arabia’s economy is set to markedly slow down this year from last year’s 8.7% `growth due to the oil production cuts the world’s top crude exporter is implementing in a bid to “stabilize the market.”
The Kingdom saw its economic growth forecast for 2023 slashed by the most among major economies in the World Economic Outlook Update by the International Monetary Fund (IMF) this week.
Significantly lower Saudi GDP growth will also weigh on the regional economic growth in the Middle East and Central Asia region this year, the IMF said.
While the Saudi growth outlook for 2023 was cut by 1.2 percentage points from the April outlook by the IMF, Russia’s economic growth estimate was upgraded.
Saudi Arabia’s partner in the OPEC+ deal, Russia, saw its growth projection revised upward by 0.8 percentage point to 1.5%, “reflecting hard data (on retail trade, construction, and industrial production) that point to a strong first half of the year, with a large fiscal stimulus driving that strength.”
Saudi Arabia is not only taking much of the burden in the OPEC+ cuts, its voluntary unilateral production cut of 1 million barrels per day (bpd) is weighing on its economic growth prospects, considering the large share of oil in its GDP and export revenues.
Saudi Arabia said in early June that it would voluntarily reduce its production by 1 million bpd in July to around 9 million bpd. The cut was later extended into August, too.
Lower exports and lower oil prices are already shrinking Saudi Arabia’s oil export revenues—the mainstay of its budget revenues accounting for around 80% of total export revenues.

Source: Oilprice.com

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