Saudi economy shrinks over the first two half of 2017

Saudi Arabia's economy has shrunk in the first two quarters this year as the OPEC kingpin continues to struggle to cope with low crude prices and painful reforms, according to official figures.

General Authority for Statistics figures show that Saudi Arabia’s gross domestic product (GDP) shrank by 2.3 percent in this year's second quarter compared with the first three months of 2017, mainly over low oil prices and less production.

Saudi Arabia's GDP in the first quarter contracted by 3.7 percent compared with the last quarter of 2016.

Saudi Arabia, the world's top oil exporter and the largest economy in the Middle East, has taken a series of austerity measures since oil prices collapsed in mid-2014. 

Until 2014, oil income made up more than 90 percent of public revenues.

The kingdom has since concentrated on diversification, including plans to introduce value-added tax (VAT) and privatise part of state-owned oil giant Aramco. 

But plans to diversify the Saudi economy to the extent in which Riyadh will be non-reliant on petrochemicals for its economy by 2030 have been doubted by analysts.

Oil prices have to an extent recovered after major producers inside and outside - including Saudi Arabia - agreed last year to cut output by 1.8 million barrels per day to boost global prices.

Producers agreed to extend the cuts for nine more months, ending in March 2018. OPEC will then contemplate the possibility of a further extension at a ministerial meeting next month.

If the gloomy figures persist, the Saudi economy is likely to contract in 2017 for the first time since the 2008 global financial crisis.

The International Monetary Fund (IMF) has forecasted that Riyadh's economy will grow by just 0.1 percent this fiscal year, which is down from 1.7 percent in 2016 and 3.4 percent from 2015. 

Riyadh has resorted to the international and domestic debt markets as it struggles to adapt to lower crude prices, and has withdrawn around $245 billion from its fiscal reserves over the past three years.

Saudi Arabia has posted budget shortfalls totalling more than $200 billion since 2014 and is forecast to post a budget deficit of $53 billion in 2017.