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DUBAI, March 31 (Reuters) – The Saudi economy has experienced growth in the fourth quarter of last year at its fastest pace since early 2016 due to an expansion of the oil sector, while that non-oil growth was slow, Sunday revealed statistics from the statistical agency.
Fourth quarter gross domestic product increased 3.59% from a year earlier. In the third quarter, annual growth was 2.5%.
"The oil sector led the recovery in the last quarter, reflecting increased production, particularly at the beginning of the quarter," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
The Saudi economy has suffered in recent years due to low oil prices and austerity measures to reduce the budget deficit.
In 2017, the economy has contracted for the first time since the global financial crisis, almost ten years earlier.
Sunday's data showed how much the kingdom's economic recovery was still based on oil production.
While the oil sector grew nearly 6 percent year-on-year, growth in the non-oil sector – essential to Saudi Arabia's efforts to diversify its economy – was 1.8 percent, down from at 2.1% in the third quarter of last year.
"We expect moderate growth in total growth in 2019 as Saudi Arabia will implement cuts in oil production," Malik said.
Saudi Arabia's economy grew by 2.21% in 2018, according to government data released in January, without breaking down the fourth-quarter figures.
Last week, Saudi Aramco, a state-owned company, announced its agreement to acquire a majority stake in Saudi Basic Industries Corp. (SABIC) from the Saudi sovereign wealth fund, the Public Investment Fund (FIP), for an amount of $ 69.1 billion.
The agreement could boost economic growth as the sovereign wealth fund has more firepower to pursue its job creation and diversification projects for the largest Arab economy, beyond the exports of the economy. oil.
Arqaam Capital, a Dubai-based company, said in a research note that the acquisition is expected to boost credit growth, "while business activity continues to improve, especially in late year, and potentially on loans from Aramco to finance the acquisition of SABIC ".
Malik said the way the FIP would implement its investments would have an impact on economic growth in 2019.
"Our badumption is that the sale of SABIC will boost PIF's investments in the second half of the year," she said. (Report by Davide Barbuscia, edited by Dale Hudson)
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