Saudi Arabia's economic output began to recover in the first quarter of 2018 after shrinking for the first time in eight years during 2017 because of cuts in oil output, official data showed on Sunday.
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Gross domestic product, adjusted for inflation, grew 1.2 percent from a year earlier in the first three months of 2018, the government's statistics agency said.
It had dropped from a year earlier in every quarter of 2017 as a global price-supporting agreement among oil exporting countries caused Saudi Arabia to cut back in its oil output. For the whole of 2017, GDP shrank 0.7 percent.
The impact of the oil deal faded at the start of 2018 after Saudi Arabia completed the required cuts. This allowed the oil sector, which comprises over 40 percent of the economy, to grow 0.6 percent from a year ago in the first quarter -- a big contrast to its 4.3 percent decline in the last quarter of 2017.
However, the first-quarter figures showed many non-oil businesses continuing to struggle under the weight of austerity steps designed to reduce the government's big budget deficit. A 5 percent value-added tax was imposed at the start of 2018 and domestic fuel prices were increased.
As a result, the non-oil sector grew just 1.6 percent from a year ago in the first quarter, only slightly faster than 1.3 percent in the previous quarter.
Within that category the private sector, which authorities hope will create new jobs to bring down an unemployment rate of nearly 13 percent among Saudi citizens, inched up just 1.1 percent, faster than 0.4 percent in last year's fourth quarter.
The construction industry shrank 2.4 percent from a year ago in the first quarter, showing builders continued to struggle with state spending curbs and corporate caution that have reduced the number of big new projects in the past few years.
The wholesale and retail sectors plus restaurants and hotels shrank 0.5 percent, suggesting Saudi consumers curbed their non-essential spending because of the new tax. An exodus of hundreds of thousands of foreign workers from Saudi Arabia due to the weak economy is also hurting consumer demand. ■
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