The slowdown in oil sector is expected as higher level of production and prices will have impact on the incremental growth in the sector, Al Rajhi Capital said in its March Economic Report. The Central Department of Statistics and Information data showed that nominal GDP growth slowed down in the last quarter of 2011 mainly on account of slowdown in oil sector and government consumption expenditure. Price is likely to be slower in coming quarters as well, the report stressed. There was a sharp slowdown in growth in nominal GDP to 15.4 percent year-on-year in Q4-2011 as against an average of 32.6 percent in the previous three quarters. The oil sector's growth retreated to 17.7 percent year-on-year in the last quarter as compared to an average growth of 50.6 percent in the previous three quarters of the year. Production in the sector has been estimated to have increased from SR229 billion in Q4-2010 to SR269 billion in Q4-2011 which peaked at SR300 billion in Q3. Oil export grew just 16 percent year-on-year in Q4-2011 compared to an average of 50 percent growth in the first three quarters. The impact of oil sector slowdown is visible through sharp deceleration in net export growth. The reduced the growth in net export which is export of goods and services minus import of goods and services. The net export was SR155 billion in Q4 whereas it was an average of SR171 billion during Q1-Q3. The growth in net export was 41 percent year-on-year compared to an average of 139 percent in the first three quarters, Al Rajhi Capital said in the report. Petroleum refining industry also witnessed slowdown in growth. However, the non-oil sector growth remained steady with slight acceleration in Q4 compared to Q3 of 2011. The sector grew by 13.5 percent year-on-year in Q4-2011 as against 10.1 percent year-on-year growth in Q3-2011. Non-oil private sector has been showing robust growth as the sector grew by 15.2 percent in Q4-2011, higher than average growth of 13.9 percent in the previous three quarters. Growth in fourth quarter in construction, trade etc, and transport etc, sectors remained close to their first three quarters averages at around 19 percent, 13.5 percent and 13 percent respectively. Growth in finance, insurance, real estate and business services sector also remained steady at around 7.2 percent through the four quarters of the year. Non-petroleum manufacturing sector also accelerated sharply to 26.5 percent year-on-year in Q4-2011 compared to an average of 21 percent in the first three quarters. However, Al Rajhi Capital report said government final consumption expenditure (GFCE) declined 17 percent year-on-year in Q4-2011 as against average growth of 26.4 percent during Q1-Q3. “This suggests that the government focused on capital expenditure in the last quarter of the year which is corroborated by sharp jump in total fixed capital formation (TFCF),” the report said. TFCF jumped by 31.7 percent year-on-year in Q4-2011 after a decline of 3.4 percent year-on-year in Q3-2011. Due to decline in third quarter TFCF grew at an average rate of 18.2 percent for the entire year. Private final consumption expenditure (PFCE) remained on accelerating trend which grew by 11.2 percent year-on-year in the last quarter as compared to an average of 8.2 percent growth in the first three quarters.
