Saudi Arabia’s economic growth eased to an annual rate of 4.7 per cent in the first quarter of 2014 as labour market measures curbed activity in some sectors, but the expansion was still stronger and more widespread than growth a year ago.
Economic growth in the world’s top oil exporter reached 5pc in October-December, the fastest pace since the third quarter of 2012.
“It is certainly the change in the labour market affecting the annual growth,” said Fahad Al Turki, head of research at Jadwa Investment in Riyadh. “(But) the quality of growth is improving. It’s spread over more sectors than the top three.”
On a quarterly basis, inflation-adjusted gross domestic product growth accelerated to 3.4pc, the fastest clip in a year, from 2.7pc in the previous quarter, the Central Statistics Office data show.
Economic growth is usually at its most robust early in the year, when the weather is at its most favourable and few public holidays halt work.
Overall, the non-oil private sector growth slowed to 4.4pc year-on-year from 6.2pc in the previous quarter, the slowest pace in at least a decade.
Around a million foreign workers left Saudi Arabia last year after a crackdown on visa irregularities as a part of labour reforms aimed at putting more Saudi nationals into jobs.
Another reason for the slowdown may be that households balance sheets are stretched after a surge in consumer borrowing over the past few years, said William Jackson, emerging markets economist at Capital Economics in London.
In the first quarter, growth in all three sectors that relied on cheap foreign labour – construction, retail and transport – slowed markedly from a year ago.
For example, construction output growth shrank to 5.6pc in January-March, the slowest pace since end-2012 and down from 9.9pc in the final three months of 2013. Manufacturing, however, grew 6.5pc, the fastest pace in two years and up from 4pc in October-December, as new investment projects come on stream.
Meanwhile, Saudi Arabian Mining Company, or Ma’aden, is in the middle of a large $9 billion project that includes a phosphate mine, several major processing facilities, smaller downstream factories and a residential area.
Crude oil sector output, which accounts for almost half of the $748bn Saudi economy, quickened to an annual 5.8pc in the first quarter, the fastest rate since mid-2012, from 4.1pc in the previous three months.
“This effect is likely to be weaker in the third and fourth quarter as the base is higher,” said Khatija Haque, head of MENA research at Emirates NBD. “Non-oil growth should pick up in the coming quarters, however.”
Saudi Arabia may raise oil output in the second half of the year to meet expected higher seasonal demand. Iraq’s exports are unaffected by the security situation.