Saudi Arabia’s economy grew by an annual 1.1% in the second quarter of 2023, down from 3.8% in the previous quarter and 11.2% in the same period of 2022, according to official data released on Monday. The slowdown was mainly due to a decline in the oil sector, which contracted by 4.2%, as the kingdom cut its crude output and faced lower oil prices.

The non-oil sector, which is the focus of Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification program, performed better, expanding by 5.5% in the second quarter. The non-oil sector includes industries such as manufacturing, construction, trade, and finance.

The Saudi General Authority for Statistics said that the second-quarter GDP figure was “affected by the decrease in the value added of the oil sector due to the voluntary reduction of crude oil production by Saudi Arabia within the framework of OPEC+ agreement”. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, have agreed to cut their combined output by 1.66 million barrels per day until the end of 2024, to balance the global oil market amid the Covid-19 pandemic and other uncertainties. Saudi Arabia has taken an additional voluntary cut of 1 million barrels per day in July and August.

The oil sector’s decline also reflected lower global oil prices, which have fallen below $80 per barrel in recent months, amid macroeconomic concerns, a recessionary dip in demand and China’s protracted exit from spartan Covid-19 restrictions. The expiring Brent futures contract with September delivery were trading at $84.89 per barrel at 9:10 a.m. London time, down by 10 cents per barrel from the Friday settlement.

The International Monetary Fund (IMF) had projected Saudi Arabia to be the fastest growing G20 economy of 2022, with an overall expansion of 8.7% last year. However, the fund revised its GDP growth forecast for Saudi Arabia from 8.7% in 2022 to 1.9% in 2023 in its July 25 issue of its World Economic Outlook, citing lower oil prices and production as well as weaker domestic demand.