Saudi Arabia: Factoring in the new OPEC+ agreement – Standard Chartered

Economists at Standard Chartered Bank expect GDP to contract by 4.5% y/y in 2020 (5% growth prior) on revival of OPEC++, non-oil weakness. USD/SAR is sitting at 3.7533.

Key quotes

“We expect Saudi Arabia’s GDP to contract by 4.5% y/y in 2020 versus our previous expectation of 5% growth. Our downward growth revision primarily reflects the revival of the OPEC++ agreement and our expectation that Saudi Arabia will continue to shoulder a large share of the proposed output cuts.” 

“We expect a recovery in the next few years, with growth rising to 1.9% in 2021 (1.3% prior) and 2.7% in 2022 (1.6% prior) as oil production curbs are gradually eased and the non-oil economy recovers from the shut-downs in 2020.”

“Notwithstanding the revival of the OPEC++ agreement, our base case remains for Brent crude to average USD 35/bbl in 2020 given global oil demand-supply fundamentals. As such, we now expect a wider fiscal deficit of 14.8% of GDP (11.6% prior) and a C/A deficit of 4.8% of GDP (3.3% prior).”