Despite supply chain challenges and two years of modest performance, Saudi Arabia’s economy is expected to grow next year, driven by increased oil output.

Why it matters: If Saudi Arabia’s oil production growth continues, it will significantly benefit other Gulf Cooperation Council (GCC) countries as they too are part of the Organization of the Petroleum Exporting Countries’ (OPEC+).

Saudi Arabia’s oil GDP contracted by 9% in 2023 due to their and the OPEC+ voluntary oil production cuts, leading to a 0.8% contraction in overall GDP, according to the International Monetary Fund (IMF).

In May 2023, Saudi Arabia agreed to 0.5 million barrels per day (b/d) in additional crude oil production cuts as part of its OPEC+ membership. In June 2024, OPEC+ extended these cuts through December 2025.

Additionally, Saudi Arabia unilaterally cut a 1.0 million b/d of OPEC+ production starting in July 2023, which plans to gradually restore from November 2024 through the end of 2025.

The world’s top oil exporter, Saudi Arabia, is preparing to abandon its unofficial target of reaching $100 per barrel. “This will allow the kingdom to reverse past production cuts and increase market share, which along with non-oil revenue growth, will help drive faster economic growth,” reads a U.S. News report.

Saudi Arabia “may cut prices for most of the crude grades it sells to Asia in December, racking weakness in Middle East benchmark Dubai,” trade sources told Reuters. “OPEC+ could delay December’s planned increase to oil production by a month or more, four sources close to the matter told Reuters on Wednesday, citing concern about soft oil demand and rising supply.”

What’s next: On October 22, the IMF lowered its GDP growth forecast for Saudi Arabia for 2024 to 1.5% and estimated growth to accelerate to 4.6% next year in its latest World Economic Outlook Report.

Despite projected economic growth port congestion in Saudi Arabia poses a significant risk to the shipping industry, potentially causing delays and higher costs for businesses engaged in international trade.

The main causes of port congestion in Saudi Arabia are increased shipping traffic, limited port capacity and logistical challenges. “The Saudi Arabian government is taking steps to address these issues, such as investing in new infrastructure and implementing automation and digitalization in port operations,” reads a GoComet report. “These efforts aim to improve port efficiency and reduce congestion, making it easier for ships to dock and for businesses to move goods in and out of the country.”

By the numbers: Customers in Saudi Arabia have averaged 25 days beyond terms, with 50% saying payment delays are increasing, according to the FCIB Credit and Collections Survey.

The most common causes for payment delays are customer payment policy and billing disputes (both 71%).

What Survey respondents are saying:

• “These customers have full teams to manage liquidated damages (LD). They claim late delivery despite delays consistently at customer’s hands due to include customs, commercial invoice changes and delayed projects. Suggest managing LD clauses in contract strictly before shipping. Add cause of delay verbiage in agreement.”
• “Purchase order (PO) issues tend to be the biggest delay. Make sure to get upfront PO’s and address PO issues timely.”