2012-11-15 00:30:56 - Saudi Arabia Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com
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. Saudi Arabia´s growth outlook remains broadly positive.
Leading indicator data show that the economy is firing on all cylinders, with high oil prices, heavy government spending and buoyant consumer confidence driving robust economic growth. With oil prices continuing to trade at historically high levels in the first half of the year, we see few risks to the country´s positive near-term
outlook. 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 an estimated 28.5% of GDP in 2011 to 10.8% of GDP by 2016.
Key Risks To Outlook
A sharper-than-expected downturn in the global economy, if it was 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 broadly subdued in 2012, on the back of moderating global energy prices and government subsidisation of food and fuel. 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 this year.
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