Saudi Arabia’s economy continued to shrink in the third quarter, as the country reels from the pandemic-hit oil sector.

The Saudi Arabian economy shrank 4.6% in the third quarter, marking the economies fifth straight quarter of contraction. The latest data showed that the economy rebounded slightly from the 7% slump in the previous quarter but was marked by declines in both the oil and non-oil sectors.

The negative growth originated mainly from the contraction in the oil sector by 8.2% and a negative growth rate of 2.1% recorded in the non-oil sector,” the General Authority for Statistics said on Thursday about the third quarter data.

The pandemic has hit the world’s largest oil exporter hard

Saudi Arabia is now facing its worst economic decline in decades as the Covid-19 pandemic has curbed global crude demand. Saudi Arabia is the world’s largest oil exporter, therefore reduced demand has had a huge impact on its economy as a whole.

The oil economy itself fell 8.2%, the biggest drop since at least the start of 2011, when Bloomberg began compiling such data. The country pumped an average of 8.8 million barrels a day between July and September, down from 9.3 million in the previous quarter and 9.4 million a year earlier.

In addition to reduced demand, Brent crude prices have also suffered since the outbreak of the pandemic. While Brent crude has risen to about $51 a barrel since the cuts started, the global benchmark is still down 22% this year, which has had an impact on revenues for oil producers.

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The country has attempted to diversify its economy in recent years

The Saudi Government has made attempts to diversify the country’s economy in recent years in order to reduce its reliance on oil. However, other sectors of the economy have still suffered amid the Covid-19 pandemic.

The government’s ‘Vision 2030’ plan to encourage investment in other sectors (real estate, financial sector and construction) to diversify revenues was paying off prior to the pandemic. In the first half of 2019, FDI inflows were $2.3bn, compared to $2.1bn during the same period in 2018.

Despite this, travel restrictions and lockdowns introduced to the curb the spread of the virus have had a terrible impact on the travel and tourism industry, which has had a knock on effect on other areas of the economy.

The private sector, the main focus in Crown Prince Mohammed bin Salman’s plans to diversify the economy away from oil, shrank by 3.1%, while the government sector grew by 0.5%, providing little relief to the economy as whole.