Saudi Economy Shrank at Slower Pace Before Houthi Escalation

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1. 1h ago

   Saudi Economy Contracts 3.8% Amid Houthi Escalation

   Saudi Arabia's economy shrank 3.8% in the third quarter, continuing a second consecutive quarter of contraction. While the oil sector fell 20.4%, non-oil growth accelerated to 1.9%. This decline represents a slower pace of shrinkage compared to the 4.7% contraction in the previous quarter. The downturn is driven by disrupted oil production and exports resulting from conflicts involving Iran and Yemen's Houthi rebels. Despite these losses, the kingdom maintains its credit standing while relying on non-oil engines to absorb external shocks.

   Why it matters

   The kingdom is attempting to diversify its economy to reduce dependence on volatile oil revenues. Regional security threats now test these ambitions as warfare disrupts corporate commuting and energy exports. The IMF anticipates broader Gulf economy contractions due to disruptions in the Strait of Hormuz.

   What is confirmed

   • The Saudi economy contracted 3.8% in the third quarter.
   • The oil sector shrank by 20.4% in the third quarter.
   • Non-oil growth accelerated to 1.9% in the third quarter.
   • The economy contracted for two consecutive quarters.
   • The 3.8% contraction is a slower pace of shrinkage than the 4.7% seen in the previous quarter.

   Still unconfirmed

   • The kingdom's business model based on corporate commuters is being challenged by war.

   What to watch next

   • IMF reports on Gulf economy contraction trends
   • Updates on oil production recovery rates
   • Further data on non-oil sector growth acceleration
   Sources used for this update (11)

   1. Bloomberg — Saudi Economy Shrank at Slower Pace Before Houthi Escalation
   2. Arab News — Houthi strikes cause damage but Kingdom’s credit standing remains
   3. Forbes Middle East — Saudi Arabia’s Non-Oil Growth Accelerates To 1.9% In Q3 As Oil Sector Shrinks 20.4%
   4. Jackson Advocate — Saudi Arabia’s ambitions beyond oil and its regional security test
   5. Asharq Al-Awsat English — Saudi Economy Relies on Non-Oil Growth Engines to Absorb External Shocks
   6. WSJ — Saudi Arabia’s Economy Shrinks 3.8% as Oil Output Falls
   7. Bloomberg — Saudi Business Model Built on Corporate Commuters Challenged by War
   8. www.geopoliticsalpha.com — Saudi Economy Shrank at Slower Pace Before Houthi War ...
   9. nationalsecurityjournal.org — Billions Lost: Saudi Arabia’s Oil Sector Shrank by a Fifth ...
   10. finance.yahoo.com — Saudi Arabia’s economy contracts 3.8% as war disrupts oil ...
   11. www.thecapitalsa.com — Wartime Slump Eases as Saudi Oil Output Starts to Recover
   confidence 90%