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Saudi economy hit hard as GDP shrinks by 7% in second-quarter

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Saudi women buy food before watching a movie at a cinema in the Saudi capital Riyadh, on June 22, 2020 as cinemas re-opened following the lifting of a lockdown due to the COVID-19 coronavirus pandemic. (AFP photo)

Saudi Arabia’s economy has shrunken considerably this year due to the impact of the coronavirus pandemic as well as the general fall in international oil prices.

Official data published on Wednesday pointed to a 7% fall in Saudi Arabia’s gross domestic product (GDP) in the second quarter.

Figures by the General Authority for Statistics showed that negative growth in GDP was felt deeper in the non-oil sector of the economy with an 8.2% fall while the oil sector shrank by 5.3%.

That is a sign of Saudi Arabia’s failure in diversifying its economy away from oil revenues as it has been repeatedly touted by senior government officials in recent years.

The statistics agency said the private sector in the kingdom has been hit hard by the recent negative growth, saying the sector declined by 10.1% while the government sector posted a negative growth rate of 3.5%.

Jobless rate surged to a record high of 15.4%, again a sign that the recession in oil industry has had deep impacts on the general situation of the economy.

Saudi Arabia, the world’s largest oil exporter, relies on crude for a bulk of its finances. Its giant state-run oil company Aramco has also posted massive losses due to a fall in international prices in recent months.

Experts believe Saudi Arabia’s dependence on oil revenues means it would take years for the kingdom to recover from the current economic crisis.

Riyadh is also involved in a costly war in Yemen, further straining a foreign currency reserve that has nearly halved in four years to stand at $400 billion.

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