Country Report Saudi Arabia July 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 suppressed.
• Government policy will focus largely on economic development and will prioritise shoring up economic growth in the face of the global recession. Municipal elections have been postponed to 2011 from 2009.
• Saudi Aramco, the state oil firm, is close to completing a major investment programme that should boost its crude oil capacity to 12.5m barrels/day (b/d). Further investment will be made in expanding natural gas output.
• Real GDP is projected to shrink by 1% in 2009, the first such contraction for a decade. Growth should recover to 3.3% in 2010 as oil output expands gently and government spending continues to rise.
• Based on our oil price assumptions and expectations of strong spending increases, the central government budget is forecast to record a small deficit in 2009, its first since 2002, before returning to surplus in 2010.
• The current account is forecast to record a surplus of 4.6% of GDP in 2009, with the price of dated Brent Blend averaging US$59/barrel, rising to 6.3% of GDP in 2010, as oil prices rise that year.

Monthly review

• Senior Saudi officials have visited Damascus as the main Lebanese factions-one supported by Saudi Arabia and the other supported by Syria-have sought to reach agreement on a new government.
• One of the king's sons, Prince Mitab bin Abdullah bin Abdel-Aziz al-Saud, has been appointed as deputy commander of the National Guard.
• The interior ministry has awarded a five-year contract to provide a 9,000-km border security system to EADS, a European aerospace firm.
• The US State Department has slightly relaxed its travel advisory for Saudi Arabia and is permitting some diplomats' family members to return there.
• The Saudi Arabian Monetary Agency (the central bank) has reduced the reverse repo rate by 25 basis points from 0.5% to 0.25%.
• Lengthy delays have been reported for trucks trying to enter the country from the UAE, as stringent new inspections have been imposed, in what may be a retaliation for the UAE's recent, abrupt withdrawal from monetary union.
• Saudi Aramco has begun pumping crude from its 1.2m b/d Khurais field.
• The Tadawul has launched a new platform for secondary trading of corporate bonds and sukuk (sharia-compliant asset-based securities).

This report covers the following industry codes:
SIC Code: 49;60;53;37;2834;80;13
NAICS Code: 22;52;44;336;3254;62;211