Saudi Arabia's GDP to grow nearly 2% in 2019: S&P

Saudi Arabia's real economic growth will remain at about 2 percent this year, similar to the growth achieved last year, a senior executive with S&P Global told Argaam.

"We expect real economic growth to remain largely unchanged in 2019 compared with 2018 at around 2 percent, with the government’s expansionary budget compensating for oil production cuts and weaker consumption due to the decline in the non-Saudi labor force," said Trevor Cullinan, director - sovereign ratings, S&P Global.

The rating agency had affirmed the rating of “A-/A-2” on Saudi Arabia's long and short-term foreign and local currency sovereign credit in October 2018.

"We expect that the Saudi authorities will continue to take steps to consolidate public finances over the next two years, while maintaining the government's large stocks of liquid external assets," it had said.

While the World Bank estimates the biggest Arab economy to expand 2.1 percent this year and 2.2 percent next year, the International Monetary Fund (IMF) has recently lowered its growth forecast to 1.8 percent for 2019, but revised up 2020 projection to 2.1 percent.

"Lower economic activity is likely to mean lower government revenues, so yes, this could increase fiscal deficits and government borrowing," Cullinan said, adding that lower GDP growth may also result in lower demand for oil and downward pressure on oil prices.

S&P expects the Kingdom to lead the Middle East and North Africa (MENA) region with $29 billion worth of long-term commercial borrowing this year.

"Saudi Arabia has ongoing sizeable government deficits and these require financing each year, either via debt issuance or liquidating government assets," he added.

Read: Saudi Arabia will be MENA’s top debt issuer in 2019: KAMCO

Earlier this month, Faisal Hasan, chief business development officer and head of investment research, KAMCO, told Argaam, that Saudi Arabia is slated to be the biggest issuer of sukuks and bonds in the MENA region this year, with total issuances expected to reach $84 billion.

Write to Parag Deulgaonkar at parag.d@argaamplus.com