Saudi Arabia Business Forecast Report Q4 2008

Publication Date	September 2008
Publisher	Business Monitor
Product Type	Report
Pages	68
ISBN Number	not applicable
Product Code	BMI02734

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Summary

Testing Times, But Government To Ride Out Storm
As we move into 2009, things are not looking quite as rosy for Saudi Arabia as they were this time last year; geopolitical tensions have risen over Iran, but without the accompanying sweetener of high oil prices (with crude having fallen quite sharply). The stock markets recovery has proved short-lived, and there was increasing speculation about a region-wide real estate bubble. That said, we remain broadly sanguine; the growth outlook is assured with oil production and infrastructure projects set to keep up momentum, and inflation - for so long our most significant concern throughout the region - should moderate towards the end of the year. If the political situation with Iran calms down as well, Saudi Arabia should be able to ride out the storm.

With Irans influence having risen substantially in the Middle East region, and tensions rising over the nuclear issue, Saudi Arabias alliance with the US will remain a strategic priority. With or without a US/ Israeli strike on Irans nuclear facilities - our core scenario remains for a diplomatic resolution to the crisis - the US support Saudi Arabia has relied upon for so long will be critical to shore up its own position in a destabilised and restive Gulf. However, this position puts it at odds with its population, currently struggling under the burden of high inflation, and its economy, given that the West is putting pressure on the Kingdom to keep pumping oil to reduce prices.

Economically, Saudi Arabia remains in rude health, although our view that oil prices were in for a sharp correction, first promoted in early July, has played out during August. We have revised down our average OPEC Basket forecast to US$106.50/bbl for 2008 (from US$121.50/bbl previously). While this has reduced our export, fiscal and current account projections slightly, the economy will remain in very good shape throughout the forecast period, and the lower liquidity should also ensure that inflation comes back under control as well.

Saudi Arabia has come 16th in the World Banks new worldwide Ease of Doing Business survey for 2009. A co-author of the report, Dahlia Khalifa, said that Saudi Arabia was 'consistently making improvements to its business environment. According to the report, Saudi Arabia has made it easier to start up a business by continuing to simplify formalities for commercial registration and reducing registration fees by 80%. It also points out that the amount of time to start a business has fallen by three days. We concur with this high rating, awarding Saudi Arabia a score of 60.2 in our proprietary ratings, with upside risks going forward.

Content

Executive Summary
Testing Times, But Government To Ride Out Storm
Chapter 1: Political Outlook
- Swot Analysis
- Bmi Political Risk Ratings
- Foreign Policy
- Iran-Us Relations Complicate Domestic Outlook
- Our Core Scenario Is For A Diplomatic Resolution To The Iran-Us Crisis, And A Moderation Of Inflationary Pressures
- Domestically, Which Bodes Well For Continued Stability. However, Long-Term, Saudi Arabias Alliance With The Us
- Will Remain A Threat
- Table: Saudi Arabia Political Overview
Chapter 2: Economic Outlook
- Swot Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Lower Oil Prices, But Outlook Still Robust
- We See Still Strong Growth In Saudi Arabia, With The Key Risks Being A Sharper Than Expected Decline In Oil Prices
- And/Or A Contraction In The Real Estate Sector
- Table: Economic Activity
- Balance Of Payments
- Oil Price Downturn No Major Concern
- Lower Oil Prices Will Hurt The Saudi Balance Of Payments, But Not To A Worrying Degree
- Table: Balance Of Payments
- Monetary Policy
- Inflation To Moderate. Finally
- Our Forecasts Are For Year-End Inflation To Hit 10% Y-O-Y, As Oil Prices Moderate, And The Dollar Bounces
- Table: Monetary Policy
- Regional Monetary Policy
- Credit Crunch Gets Local: Key Implications
Chapter 3: 10-Year Forecasts
- The Saudi Economy To 2017
- Politics Main Risk To Long-Term Outlook
- Assuming The Survival Of The Current Form Of Government Into The Medium Term, We See Ongoing Strong Growth
- And Asset Accumulation Via Real Expansion In Investment And Exports, Amid Still Historically High Oil Prices
- Table: Saudi Arabia Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
- Mega-Urban Regions
- Table: The Worlds 30 Largest Urban Agglomerations
- Table: The Worlds Richest Cities In 2020 By Gdp
- Table: The Worlds Fastest Growing Urban Areas By Population
Chapter 5: 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: Middle East & Africa Annual Fdi Inflows
- Market Orientation
- Table: Top Export Destinations
- Table: Bmi Trade Ratings
- Operational Risk
Chapter 6: Key Sectors
- Information Technology
- Executive Summary
- Saudi Arabias It Market Is Set To Continue On A Strong Upwards Path, Driven By A Buoyant Economy And Ongoing
- Infrastructure Deployments In Major Verticals Such As Oil And Gas, Financial And Telecoms
- Table: Internet Historical Data And Forecasts
- Power
- Table: Saudi Arabia Power (Thermal) Historic Data & Forecasts
Chapter 7: Bmi Global Assumptions
- Global Outlook
- Table: Global Assumptions
- United States
- Eurozone
- Japan
- China
- Commodities