2013-12-09 12:07:42 - Recently published research from Business Monitor International, "Saudi Arabia Business Forecast Report Q1 2014", is now available at Fast Market Research
Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its key bases of support, given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment coupled with a lack of political liberties mean that tensions will continue to linger.
We expect the Saudi Arabian economy to perform well throughout the coming quarters, on the back of minor gains in oil output and the continuing strength of non-hydrocarbon private sector economic activity. We forecast overall real GDP growth of 4.3% in 2014, up from an estimated 3.6% in 2013.
Although balance of payments stability in Saudi Arabia is unlikely to come
under any pressure in the foreseeable future, we expect the current account surplus to shrink substantially in the years ahead, falling from 23.7% of GDP in 2012 to 9.8% of GDP by 2017.
Full Report Details at
- www.fastmr.com/prod/751984_saudi_arabia_business_forecast_report ..
Developments in Egypt, Syria and Iran have disrupted relations between Saudi Arabia and its traditional ally, the United States. Al -though we expect the alliance to remain firm over the coming years, we note that Riyadh's foreign policy risks have increased, with the prospect of a US-Iran detente presenting a particular quandary to Saudi policymakers.
Key risks to outlook
The government's recent intensification of workforce nationalisation efforts (under a programme known as 'Saudisation') poses a downside risk to the economic outlook. We expect heightened 'Saudisation' measures to add to the costs for the private sector over the medium term, leading to an increase in project delays and a more difficult business environment overall.
A sharper than expected downturn in the global economy, if it were to translate into a substantial decline in oil prices, would pose significant downside risks to our forecasts for Saudi Arabia's fiscal and current account position, though it remains highly unlikely that either account will fall into the red in the near term.
We expect inflation to remain relatively subdued in 2014, albeit reaching high levels relative to the rest of the region. However, we highlight that a prolonged period of robust growth, coupled with loose fiscal and monetary policy, poses a medium-term inflation risk, and could begin to spur more rapid price rises in the coming years.
Partial Table of Contents:
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
rising strains in us-saudi relationship
- Developments in Egypt, Syria and Iran have disrupted relations between Saudi Arabia and its traditional ally, the United State s. Although we expect the alliance to remain firm over the coming years, we note that Riyadh's foreign policy risks have increased, with the prospect of a US-Iran detente presenting a particular quand ary to Saudi policymakers.
Long- term political outlook
scenarios For the coming Decade
- The Saudi royal family relies on steady oil revenues to maintain its tight grip on the population. As a result, a sustained downturn in global oil demand could lead to substantial unrest and, potentially, regime change over the long term.
taBLe: recent L eaDersHip cHanGes
taBLe: poLitica L oVerVie W
chapter 2: economic outlook
BMi economic risk ratings
Healthy outlook For 2014
- We expect the Saudi Arabian economy to perform well throughout the coming quarters, on the back of minor gains in oil output and the continuing strength of non-hydrocarbon private sector economic activity. We forecast overall real GDP growth of 4.3% in 2014, up from an estimated 3.6% in 2013.
taBLe: econoMic actiVit Y
Housing And 'Saudisation' To Drive Inflation
- We leave our consumer inflation price forecasts unchanged, projecting the headline print to average 4.1% in 2013 and 4.0% in 2014. Although we expect food price inflation to trend lower over 2014, limited progress to date in the construction of new housing stocks means that rental inflation will stay elevated next year. Ongoing workforce nationalisation efforts provide further upside risk to
What Will the opening of the tasi Look Like?
- Over the last few years, expectations have steadily grown for Saudi Arabia's stock market exchange (TASI) to be opened up to foreign direct investment. Such a move would likely take the form of a Qualified Foreign Investor programme, in which only a handful of large institutional investors would be allowed direct participation. We also caution that heavy restrictions on investment would remain in place.
taBLe: M onetarY poLicY
taBLe: recent reGuLator Y reForMs
Heading For another Year of robust Growth
- We expect the profitability of Saudi Arabia's commercial banking sector to remain robust heading into 2014, although the ongoing difficulties faced by the construction sector could put mild pressure on earnings over the coming quarters. We forecast credit growth of 13.0% by end-2013 (from 10.0% previously), and 10.0% in 2014.
taBLe: BanKinG sector oVerVie W
regional outlook: Gcc outlook
Key themes For 2014
Full Table of Contents is available at:
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