Recently released data show that real GDP growth decelerated to +1.7% y/y in Q1 from +4.3% in Q4 2018. The latter figure was revised upwards from an earlier estimate of +3.6% y/y, which also led to an upward revision of full-year 2018 growth to +2.4% from +2.2% previously. The deceleration in Q1 is almost entirely due to a sharp slowdown of growth in the oil sector to just +1% y/y from +7.1% in Q4. This high volatility mirrors the seesaw changes with regard to oil output cuts by OPEC, Russia and other major oil producers. Those cuts were cancelled in June 2018, leading to sharp output increases thereafter until their re-imposition at end-2018. Meanwhile, growth in the Saudi non-oil sector edged down only marginally to +2.1% y/y in Q1 from +2.2% in Q4. Looking ahead, we expect the non-oil sector to remain broadly stable while continued oil output cuts (extended until March 2020) will continue to weigh on growth which we forecast at +1.6% in 2019 as a whole. Downside risks to this forecast include the uncertain global economic outlook as well as increased geopolitical risks in the region.
