Al Rajhi Capital: Saudi Economy Sees Strong Start to 2023 as Brent Keeps Steady

Saudi Arabia’s economy remained strong at the beginning of 2023 as Brent oil prices held steady, according to a report from Al Rajhi Capital. The financial services company flagged up the Kingdom’s inflation rate as a factor in this, with Saudi Arabia's Consumer Price Index increasing by 3.4 % in January – well below other leading countries such as the US with 6.4 % and the UK with 10.1 %. “The major driver behind this trend turned out to be housing rents, which accelerated substantially. This reflects a recovering property market, with prices specifically rising in the Riyadh region,” said the report.

Other increases came in the Wholesale Price Index, which grew 3.6 % in January compared to the same period in 2021. This rise was driven by an increase in the ‘Food & Beverages, Tobacco & Textiles’ component, which went up by 7.6 %. Al Rajhi Capital said that while the oil sector had delivered a strong start to the year, non-oil activities are projected to become the “key growth driver” for the Saudi economy in 2023, as oil production is expected to “consolidate”.  “These activities demonstrated a solid expansion in 2022, growing by 6.2 % year-over-year in Q4, and this trend is anticipated to continue into 2023,” said the report.

According to the report, Saudi Arabia’s Index of Industrial Production increased 7.3 % year-on-year in December, mainly due to an increase in manufacturing sectors’ activity, which went up 18.5 %. Non-oil exports in the final month of 2022 experienced a 24.4 % decrease compared to December 2021, mainly fueled by a 74.6 % drop in shipments of Transport Equipment. The foreign reserves of the Saudi Central Bank rose 2.4 % in January to SR1,716 billion (US$457.21 billion).