Country Report Saudi Arabia February 2009

Outlook for 2009-10

• The rule of the Al Saud family is not expected to encounter any fundamental challenges in 2009-10, with the opposition fragmented and repressed.
• Government policy will focus largely on economic development and will prioritise shoring up economic growth in the face of the global economic slowdown. Partial municipal elections scheduled for 2009 may be delayed.
• The government will invest in a large-scale expansion of crude oil, refining and gas capacity, while also developing the non-oil economy, in order to reduce the country's dependence on crude oil and to foster job creation.
• Saudi Arabia will continue to seek foreign investment into six new "economic cities", but may need to provide new public financing or scale back some of its plans, given the severe seizure in global financial markets.
• A number of large-scale industrial joint ventures between parastatals and foreign companies may be at risk as businesses cut investment plans.
• Based on the Economist Intelligence Unit's assumptions about oil production and prices, and given extensive spending commitments, the budget is forecast to record substantial deficits in 2009-10, for the first time since 2002.
• The current account is forecast to record deficits of 11.7% of GDP in 2009, based on an oil price of US$35/barrel, and 1.7% of GDP in 2010, with oil at US$50/b. However, it is likely to return to surplus in 2011-13.

Monthly review

• Al-Qaida's self-proclaimed leader in Yemen has announced that the Yemeni and Saudi branches of the group have merged under his leadership.
• The king has said that the Arab League-backed peace offer to Israel "will not remain on the table forever", following Israel's war in Gaza.
• A former Saudi ambassador to the US has said that the new US government will have to "drastically revise" its policies on the Israeli-Palestinian conflict if it wants to maintain its "special relationship" with Saudi Arabia.
• China's president, Hu Jintao, has visited Saudi Arabia and the two countries have signed a number of economic agreements.
• The International Energy Agency has estimated Saudi crude production at 8.1m barrels/day (b/d) in January, compared with 8.4m b/d in December.
• The central bank has cut interest rates for the fifth time since October 2008, and the Public Investment Fund has eased its lending conditions.
• Etihad Atheeb, a telecommunications firm, has become the first company to launch an initial public offering in Saudi Arabia since August 2008.

Source: Country Report