Saudi economy returns to growth on back of oil price rises

The Saudi economy has seen a great increase and has pulled itself out of a recession in the first quarter of 2018 due to the oil price increase.

Capital Economics said the Saudi economy grew by 1.5 percent in the first quarter after a 0.7 percent decrease in 2017.

“The oil sector was the main driver of the recovery,” the London-based group said.

Oil prices rose to approximately $80 a barrel last month from under $30 a barrel in 2016 after OPEC and non-OPEC producers made a deal to cut output.

Resulting in a crash in oil prices, the economy drastically decreased. For the past 4 years, Saudi has announced a budget deficit and made drastic changes to level out their financial status.

Saudi Arabia borrowed from domestic and international markets, increased fuel and power prices and introduced the 5 percent value-added tax (VAT) to make up for the budget deficit.

Since the recovery of oil prices, Saudi has seen an increase in its’ revenue, Jadwa Investment said that Saudi fiscal reserves increased by $13.2 billion in April, making this the largest monthly increase since October 2013.

The reserves were at $506.6 billion in April, down from $732 billion at the end of 2014.

Now, the government are expecting a 2018 shortfall of $52 billion, significantly lower from the initial budget deficit in 2014 of $260 billion.