Saudi Arabia Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	57
ISBN Number	not applicable
Product Code	BMI02093

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Summary

Looking Good But Inflation Remains The Key Risk Saudi Arabia's sound economic performance is likely to continue over the forecast period as high oil prices and increasing oil production will support steady real GDP growth. In addition, the government's efforts to diversify away from the hydrocarbons industry - notably through the building of seven economic cities - and improve the business environment look set to continue. That said, rising inflation and ongoing sectarian problems will remain the key risks, constraining both the government's domestic economic policy and foreign relations.

On the political front, we continue to see very solid relations between Saudi Arabia and the US, even given the anticipated change in the White House in November, which will shore up the al-Saud regime domestically. Indeed the need to keep on side with the world's largest oil producer will prevent any radical policy departures from a new US administration, while rising inflation and the threat of sectarianism across the Kingdom will prove that the Saudi government is not secure enough at home to risk damaging ties with its key global ally.

We expect the economy to expand steadily over the forecast period, with real GDP growth set to average 4.1% over the five years, on the back of increasing oil production and high oil prices. On top of this, the government looks set to continue to develop the non-oil sector through the building of seven industrial cities, a strategy that will not only aid diversification away from hydrocarbons but also create jobs and reduce regional disparities. However, as in many other countries in the region, accelerating inflation presents a key risk: CPI hit 10.5% y-o-y in April 2008, and the issue looks set to remain the key problem for the government going forward.

Despite being the largest economy in the Middle East, Saudi Arabia's business environment has been highly underdeveloped over the last few years. However the government is now starting to address these problems, by developing the Kingdom's electricity facilities and improving education services. Furthermore, the Capital Markets Authority (CMA), the regulating body of the Tadawul All-Share Index, is continuing to in its efforts to root out corruption and expose fraudulent activities, which will help to ensure foreign investor interest in the region's largest bourse.

Content

Executive Summary
Looking Good But Inflation Remains The Key Risk
Chapter 1: Political Outlook
- Swot Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Us Elections, Shi'a Activism, Inflation: Interesting Times
- Despite Evidence Of Irritation On Both Sides, We Do Not Anticipate Any Major Shift In Saudi-Us Relations, Even
- With A Significant Change Of Leadership In The White House.
  - Table: Saudi Arabia Political Overview
Chapter 2: Economic Outlook
- Swot Analysis
- Bmi Economic Risk Ratings
- Provinces & Regions
- Economic Cities To Boost Diversification
- In An Effort To Increase The Pace Of Diversification Away From The Hydrocarbons Sector, As Well As Create Jobs
- And Reduce Regional Disparities, We Welcome The Government's Plan To Build Seven Industrial Cities Across The
- Kingdom, Each Of Which Will Focus On Different Industrial Sectors.
- Economic Activity
- Steady Growth As Diversification Continues
- We Expect Saudi Arabia To Record Steady Real Gdp Growth Rates Over The Coming Years, On The Back Of Increasing
- Oil Production And High Oil Prices.
  - Table: Economic Activity
- Investment Climate
- Tasi To Remain Gulf's Biggest Despite Short-Term Weakness
- In Spite Of Ongoing Equity Weakness, Portfolio Investors Are Continuing To Take Advantage Of Saudi Arabia's
- Attractive Investment Climate. Meanwhile Foreign Direct Investment Inflows Look Set To Remain Buoyant Over
- The Coming Years.
Chapter 3: Special Report
- Business Outlook For Global Frontier Markets
- Growing Fast On The New Frontier
- The 41 States That Bmi Examines In A New Report On Our Online Service May Make Up Only A Small Slice Of The
- World Economy, But They Possess Characteristics That Will See Them Gain Importance In The Eyes Of Investors
- And Global Businesses Over The Coming Years.
  - Table: Frontier Markets - Key Data And Projections For Top 10 Countries
- Frontier Investment
- Potential And Pitfalls
- The Spectacular Macroeconomic Performance Of Frontier Markets In Recent Years Has Been Matched By Mildly
- Successful Efforts To Deepen Capital Markets.
  - Table: Gdp Per Capita, Us$ (In Order Of % Increase)
  - Table: Diversity Through Frontier Markets - Correlation Coefficients January 2004-April 2008
  - Table: Frontier Market Indices
- Regional Overview
- Laos
- Neighbouring Economies The Key To Growth
- Laos's Gdp Growth Has Been Boosted In Recent Years As Neighbours China, Thailand And Vietnam Compete For
- Its Natural Resources.
- Yemen
- Huge Potential, But Don't Bank On Gcc Membership
- Markets Do Not Come Much More Frontier Than Yemen, And, As Would Be Expected, There Is Huge Potential For
- Development, With The Prospect Of Eventual Gcc Membership Likely To Act A Key Investment Pull.
  - Table: Yemen Economic Activity
- Democratic Republic Of The Congo
- Mining Industry To Drive Growth
- The Democratic Republic Of The Congo's Mining Industry Will Be A Key Driver Of Growth And Is Likely To Attract
- Significant Levels Of Fdi, With Our Real Gdp Forecasts Standing At 8.3% And 7.9% In 2008 And 2009, Respectively.
  - Table: Democratic Republic Of The Congo - Economic Activity
- Cuba
- Investment Prospects After Fidel
- The Accession Of A New Leadership Structure In Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- With The Us May Be Lifted And Cuba May Move Toward Market Liberalisation.
  - Table: Cuba Macroeconomic Data And Forecasts
- Mongolia
- Minerals To Drive Economic Boom
- Mongolia Is In The Midst Of A Massive Resource-Led Economic Boom That Should Lift Gdp Growth Into The Double
- Digits And Underpin Robust Increases In Exports And Inflows Of Foreign Investment Capital Over The Long Term.
  - Table: Mongolia - Economic Activity
Chapter 4: Business Environment
- Swot Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
  - Table: Bmi Business And Operational Risk Ratings
- Institutions
  - Table: Bmi Legal Framework Ratings
- Infrastructure
  - Table: Labour Force Quality
- Market Orientation
  - Table: Middle East & Africa Annual Fdi Inflows
  - Table: Bmi Trade Ratings
- Tax Regime
  - Table: Top Export Destinations
- Operational Risk
Chapter 5: Key Sectors
- Food & Drink
  - Table: Saudi Arabia Food Consumption Indicators
- Telecoms
  - Table: Telecoms Sector - Internet - Historical Data & Forecasts