Jadwa Investment projected Saudi Arabia's real GDP growth to slightly decelerate from 2.2% in 2018 to 2% of GDP in 2019, mainly due to lower hydrocarbon output. It forecast growth in the hydrocarbon sector to slow down from 2.8% in 2018 to 1.6% this year, as output is expected be constrained by production cuts under the OPEC agreement. However, it anticipated non-hydrocarbon sector growth to slightly accelerate from 2.1% in 2018 to 2.3% in 2019 amid an expansionary fiscal policy as well as stronger activity in the non-oil manufacturing, construction and transportation sectors. It considered that global economic and regional political developments, lower global oil prices, as well as tight global financing conditions constitute the main external risks, while the increase in expatriate levies in 2019 is the most significant domestic risk.  

In parallel, Jadwa forecast the Kingdom's fiscal deficit to widen from 4.6% of GDP in 2018 to 5.5% of GDP in 2019 and to miss the government's target of 4.2% of GDP, due to lower-than-budgeted oil revenues and record-high public spending. However, it noted that its revenue projections for this year exclude potential receipts from privatization or proceeds from corruption probes. It anticipated fiscal financing requirements to reach about SAR118bn in 2019, and expected authorities to issue external bonds this year, and to drawdown government deposits held at the Saudi Arabian Monetary Agency (SAMA) to finance the deficit. In turn, it projected the gross public debt level to rise from 19% of GDP at end-2018 to 22% of GDP at the end of 2019. Further, it projected the current account surplus to decrease from 9.1% of GDP in 2018 to 7.9% of GDP in 2019, due to lower export receipts, but to recover to 8.3% of GDP in 2020 in case of higher oil and non-oil export revenues. In this context, it did not anticipate a significant buildup in foreign currency reserves at SAMA, amid sizable net outflows from the non-reserve financial account. It forecast official reserve assets at $508bn, or about 62.2% of GDP at end-2019 and at $516bn, or about 59.4% of GDP at end-2020.   
Source: Jadwa Investment