Saudi GDP set to grow by 1.2 percent in 2018: Coface

Saudi Arabia's GDP will grow 1.2 percent in 2018, compared to a 0.5 percent contraction last year, driven by the gradual recovery in the non-oil economy, French credit insurer Coface said in a new report.

The construction sector will lead the recovery as it will quickly start feeling the benefits of restarting investment projects, it added.

Additionally, measures aimed at boosting employment among the Saudi population will help bring down the unemployment rate from 12.8 percent in 2017.

"Credit will be less constrained by the contraction in liquidity in the money markets with the slowing of public debt issues on the domestic market. The improvement in financing terms will help boost the weak recovery in the private sector," the credit insurer said.

However, the report warned that the rise in inflation following the imposition of value-added tax (VAT) would work to "limit the positive effects of increased public spending" on the level of activity although rise in oil prices would give more room for the government to manoeuvre for "a more expansionary budget policy".

In December, Saudi Arabia announced it would increase spending to a record SAR 978 billion in 2018, to lift the economy out of recession in the face of low oil prices.