Country Report Saudi Arabia June 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 economic slowdown. 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. 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. Rising government spending and subsidies for private-sector investment should partly offset a contraction in oil output.
• Real GDP growth should recover to 3.1% in 2010 as oil output expands gently and government spending continues to rise.
• Based on our oil price assumptions, the central government budget is forecast to record deficits in 2009-10, for the first time since 2002.
• The current account is forecast to record a deficit of 2.1% of GDP in 2009, with the price of dated Brent Blend averaging US$47.5/barrel, but should return to near-balance in 2010 assuming oil prices recover to US$53.3/b.

Monthly review

• The Saudi cabinet has announced that the municipal elections that were due to take place this year will be postponed until 2011.
• The US president, Barack Obama, has met King Abdullah in Riyadh, as part of a Middle Eastern tour aimed at reaching out to Muslims.
• The new US ambassador to Saudi Arabia has been named as James Smith, who is currently the head of international business development at Raytheon, a major US arms company.
• OPEC has decided to leave its production quotas unchanged, and the Saudi oil minister has expressed confidence that international oil prices will return to US$70-80/barrel as the world economy recovers.
• The Saudi oil minister has said that Saudi Aramco's programme of crude capacity expansion is close to completion, but that a new 900,000-b/d increment at the Manifa field is likely to be delayed until 2013.
• The finance minister has said the state will establish a firm to securitise mortgages into sharia-compliant sukuk (asset-based securities).
• Private-sector lending for imports dropped sharply in the first quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;60;70;49;20;47;37;65
NAICS Code: 212;52;72;22;11;311;48;336;53