Saudi Arabia is expected to join the group of countries with a GDP of more than $1 trillion, boosted by oil

By Dominic Dudley

Saudi Arabia is about to join the club of countries whose economy exceeds 1 trillion. dollars this year, boosted by rising oil revenues in the wake of Russia’s invasion of Ukraine.

In 2021 there were 18 countries with a GDP greater than 1 trillion. dollars, according to the IMF. At the top of the list was the USA with an economy of 23 trillion. dollars, while China followed in second place with 17.5 trillion. dollars and Japan in third place with 4.9 trillion. dollars.

Saudi Arabia had the 19th largest economy last year, but is still well short of the $1 trillion mark. dollars, with a GDP of 834 billion dollars.

What has changed this year is the rise in oil prices, the mainstay of the Saudi economy, despite efforts to diversify the economy. According to the US Energy Information Administration, the cost of a barrel of Brent crude – the main international benchmark – is expected to average over $104 this year, up from $70.89 in 2021 and $41.69 in 2020.

Oil prices rose after Russia’s invasion of Ukraine in February and as a result of Saudi Arabia-Russia cooperation to curb oil production agreed through OPEC+.

These developments brought huge revenues to Saudi coffers. Riyadh posted a budget surplus of $20.8 billion for the second quarter of this year, when oil revenue rose nearly 90 percent year-on-year.

This situation looks set to continue for the rest of the year. “We expect the country’s budget to record a surplus of 10.4 percent of GDP this year, after nearly a decade of fiscal deficits,” Emirates NBD bank said on Aug. 5.

In Saudi Arabia, high oil revenues equate to rapid economic growth. Data released by the government on July 31 showed the economy expanded by 11.8% year-on-year in the second quarter, with oil sector growth at 23.1% and non-oil sector growth at to 5.4%.

According to IMF forecasts, the economy will grow by 7.6% in the full year, bringing Saudi Arabia’s GDP to $1,040 billion. Others expect even faster growth. Capital Economics expressed confidence that the country’s economy will expand by 10% this year.

Oxford Economics also expects the country’s economy to exceed $1 trillion. dollars this year, a critical threshold for the government, which is seeking to expand its economy to $1.7 trillion. dollars by 2030.

It should be noted that Saudi Arabia is not the first country in the Middle East to surpass the 1 trillion mark. dollars as Iran joins the club in 2021. Although it faces sanctions, it also benefits from high oil prices.