ABU DHABI, April 30 – Saudi Arabia’s real gross domestic product grew 2.8% in the first quarter, year-on-year, preliminary government estimates showed on Thursday, slowing from 3.7% a year ago, as the economic fallout of the U.S.-Israeli war on Iran on the world’s top oil exporter becomes clear.
Tehran’s attacks on Gulf states, in response to U.S.-Israeli strikes that began in late February, have damaged major energy facilities and disrupted shipping through the Strait of Hormuz, which would normally handle about 20% of global oil and liquefied natural gas flows.
As a result, economic growth in the Gulf is expected to sharply slow this year, analysts say, with several economies forecast to contract this year, before rebounding in 2027.
Non-oil activities grew 2.8% in the quarter, and oil activities increased 2.3% from the prior-year period, the General Authority of Statistics data showed. In the same quarter last year, non-oil activity growth was 5.5%.
On a quarterly basis, growth shrank 1.5% in the three months to March 31 compared to the fourth quarter, driven by a decline in oil activities. Oil activity decreased 7.2% from the fourth quarter, while non-oil activity was almost flat.
Prior to the war in the region, Saudi Arabia had begun to ramp up oil production in the second half of last year after easing voluntary curbs which it had implemented over several years to support the oil market.
But the kingdom is expected to be less severely affected by the war than its Gulf neighbours due to its capacity to redirect some exports through alternative routes as well as due to its relatively more resilient non-oil industrial production, the International Monetary Fund said.
The Fund cut its 2026 growth forecast for Saudi Arabia to 3.1%, 1.4 percentage points lower than a January projection. A Reuters analyst poll projected GDP growth of 2.6% in 2026.
(Reporting by Rachna UppalEditing by Alexandra Hudson)
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