Country Report Saudi Arabia January 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

• Saudi Arabia has been put in an uncomfortable position by Israel's onslaught against Hamas in Gaza. It has called for a ceasefire but has been criticised in much of the region's press for not doing enough to stop the conflict.
• The outgoing US president has praised Saudi Arabia as a staunch ally in the "war on terror", highlighting the renewed strength of bilateral relations.
• The oil minister has said that Saudi Arabia's OPEC quota stands at 8.05mbarrels/day after the cuts OPEC announced in December, and added that the kingdom was prepared to pump even less if inventories rose further.
• The broad outlines of the 2009 budget have been made public, and the ministry of finance anticipates a fiscal deficit of SR65bn (US$17.3bn).
• Preliminary estimates have been released for the 2008 budget outturn, putting the budget surplus at SR590bn (US$157bn), or just under 35% of GDP.
• Real GDP has grown by 4.2% in 2008, according to the Ministry of Finance.
• Rio Tinto has cancelled plans to finance a 49% stake in a proposed aluminium smelter in Saudi Arabia, citing global financial conditions.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;10
NAICS Code: 52;212