Economic data
Nov 15th 2007
From the Economist Intelligence Unit
Source: Country Data
The Saudi leadership's commitment to political reform is limited, and is constrained by the overriding need to retain a consensus among the royal family and influential clerics. As a result, a coherent and comprehensive strategy to address legitimacy issues is lacking. High oil prices will allow the government to further increase public spending as part of its efforts to dampen potential unrest.
The security forces' partial success in pursuing militants will reduce the risk of further major attacks on Western and government targets, although attempts are likely to occur. Concerns over security risks in Saudi Arabia, together with the shortcomings of the legal environment and bureaucracy, will continue to constrain the levels of foreign investment over the forecast period.
Oil output is likely to have declined in 2007 as Saudi Arabia and some of its fellow OPEC members have sought to shore up oil prices in the face of expected output increases by non-OPEC states. This will have constrained GDP growth, but high levels of public expenditure and private-sector credit expansion will have allowed GDP to rise slightly to 4.7%. However, the kingdom will continue to expand its spare capacity, and production is likely to rise from 2008 as non-OPEC output growth slows. This will help to support GDP growth of around 5.5% over the forecast period.
We expect the price of the benchmark dated Brent Blend to remain high by historical standards at US$69.5/barrel in 2008 and US$63.8/b in 2009, reflecting continuing strong demand, slow supply growth and a narrow margin of spare capacity. As supply constraints ease and capacity rises, prices will be lower in 2010-12, but are not expected to drop below an annual average of US$60/b.
Strong oil prices and historically high output levels will enable the government to raise public spending, particularly on capital projects, while also recording fiscal surpluses. These are projected to decline from 19% of GDP in 2007 to 5.7% of GDP in 2012 as spending continues to increase.
The government will use part of the fiscal surpluses to continue to reduce its domestic debt stock, which is expected to fall from an estimated 28% of GDP at end-2006 to about 2% of GDP at end-2012.
Despite high oil export earnings over the forecast period, strong import growth will push down the trade surplus. Coupled with rising invisibles payments, this will lead to a narrowing of the current-account surplus from an estimated 23% of GDP in 2007 to 6.1% of GDP in 2012.
Key indicators
2007
2008
2009
2010
2011
2012
Real GDP growth (%)
4.7
5.6
5.6
5.4
5.4
5.5
Consumer price inflation (av; %)
4.0
4.2
3.8
3.6
3.5
3.2
Budget balance (% of GDP)
18.9
16.6
10.3
6.5
6.5
5.7
Current-account balance (% of GDP)
23.2
18.5
11.0
6.7
7.0
6.1
3-month deposit rate (av; %)
5.3
4.7
4.8
5.0
5.0
5.0
Exchange rate SR:US$ (av)
3.75
3.75
3.75
3.75
3.75
3.75
Country Data
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