Country Forecast Saudi Arabia May 2018 Updater

Country Forecast Saudi Arabia May 2018 Updater

  • May 2018 •
  • Report ID: 4983987 •
  • Format: PDF


  • The Al Saud family will retain its control over the Saudi political system. Ruling family dynamics will be dominated by the process of shifting power to the next generation, with the king, Salman bin Abdel-Aziz al-Saud, set to be the last son of the kingdom's founder, Ibn Saud, to sit on the throne. However, the continued advancement of his youthful son and new crown prince, Mohammed bin Salman al-Saud, risks aggravating internal family friction, and possible attempts by more senior Al Saud figures, such as the former crown prince, Mohammed bin Nayef al-Saud, to wrest control over the throne could leave Mohammed bin Salman vulnerable as crown prince. Mohammed bin Salman will respond to such threats by appointing senior members of his own branch of the Al Saud to important official posts.
  • The government will maintain a proactive role in the region, with a focus on containing Iranian influence and counterbalancing the waning role of its long-standing ally (and security guarantor), the US. Under the crown prince, the kingdom will seek to forge an anti-Iran axis, which will see Saudi Arabia maintaining its presence in Yemen and stepping up pressure on neighbouring Qatar to cut defence ties with Iran (albeit with little success).
  • Faced with oil market uncertainty, the government will rein in subsidies, in part to sustain high levels of operational spending. The fiscal deficit will decline gradually as a proportion of GDP, averaging 6.1% of GDP in 2018-22, as the government rolls out new revenue-raising measures and curbs the growth of current expenditure. The pace of consolidation will be slowed by modest increases in capital spending.
  • As part of its National Transformation Plan and Vision 2030, the government will seek to boost the role of the private sector by stimulating investment in defence, manufacturing, tourism and renewables, in particular. However, we expect these plans to be modified over time as the government stretches out the execution timeline to reduce cost overruns. As a result, diversification plans will proceed at a slow pace during the forecast period.
  • The extension of the current oil output cuts to end-2018 will mean that real GDP will expand only modestly this year. Rising crude production, alongside spending on capital projects thereafter, should lead to a modest pick-up in growth in 2019-22.


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