Analysts see 2023 contraction likely on lost oil volumes
Saudi cut is biggest production drop in nearly 15 years
Extra Aramco dividend provides some cushion for public finances
PIF spending spree not seen slowing despite hit to state revenue

DUBAI, Sept 8 Reuters Saudi Arabia faces the risk of an economic contraction this year following its decision to extend crude production cuts, highlighting its still heavy reliance on oil as reforms to diversify are slow moving.

Riyadh says it aims to stabilise the oil market by extending a voluntary oil output cut of 1 million barrels per day until the end of 2023. Its announcement on Tuesday sent oil prices above 90 for the first time this year, but they are below average prices of around 100 a barrel last year in the wake of Russia39;s invasion of Ukraine.

Declining oil production and revenue this year could see Saudi Arabia39;s economy shrink for the first time since 2020 at the height of the COVID19 pandemic, although a hefty dividend from state oil producer Saudi Aramco should provide a cushion for public finances.

Cutting oil output for another three months, on top of production cuts earlier in the year, translates into a 9 fall in production in 2023 the biggest production drop in nearly 15 years for OPEC39;s de facto leader said analyst Justin Alexander at Khalij Economics.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, now sees Saudi gross domestic product GDP contracting 0.5 this year, revising her…