Saudi GDP growth at highest since 2003

Strong oil prices will lift Saudi Arabia’s real GDP by around six per cent in 2011 but growth is projected to slow down in 2012, the Gulf Kingdom’s largest bank said on Tuesday.

The high oil export income will allow the largest Arab economy to record a budget surplus of SR174 billion ($47 billion) this year although Riyadh had forecast a deficit.

In a study sent to Emirates 24/7, National Commercial Bank (NCB) said oil prices have remained high despite global economic turbulence, attributing this mainly to regional unrest.

“As production levels rose, Saudi benefited from exceptionally higher revenues and is expected to record its strongest growth since 2003 at six per cent this year,” it said.

It projected the Kingdom’s oil revenues to reach SR918 billion while the non-oil sector will generate SR80 billion.

Earlier this year, a series of royal decrees will add around SR180 billion to total expenditures to reach an expected SR824 billion, NCB said, referring to King Abdullah’s massive financial handout to citizens, including construction of 500,000 houses.

As such, capital expenditure will represent 25 per cent of total expenditure and current expenditures take up 75 per cent, with an increase of 41 per cent for the latter, it said.

“The budget will record a surplus of SR174 billion this year driven by the oil sector…..additionally, total exports are expected to reach $339.5 billion, compared to $251 billion in 2010,”the study said.

“Furthermore, Saudi has managed to reduce its public debt to low levels, reaching SR167 billion or 10.2 per cent of GDP in 2010.@ NCB said the country’s immense financial reserves can easily pay off that amount, but due to the low cost of debt, the government opts for focusing on infrastructure projects and increases their reserve levels in an attempt to safeguard the economy.

“We expect the economy to moderate in 2012 due to a contraction in oil production as Libya reaches normal levels.”