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GDP in Saudi Arabia to Climb 3.9 Percent This Year

Saudi Arabia : 13 March 2011

Supported by the expectation of rising oil production this year and a positive future for oil prices, there is continued potential for growth in Saudi Arabia, according to a recent report “Saudi Arabia Business Forecast Report for Q2 2011,” issued by Business Monitor International.

As well as the progress seen in the oil industry, the spending and investments that Saudi is making in the non-oil industries will also result in positive effects on the overall economy.

The strong growth seen around the nation will improve the investment climate and draw in more foreign investments.

Also, due to the higher standard of living in Saudi Arabia, the Kingdom is unlikely to experience the degeneration and harmful results of social tumult as seen in Tunisia and Egypt.

The positive outlook on economic growth throughout Saudi Arabia is laid out in the report and real GDP is expected to rise by 3.9 percent this year, up from the 3.0 percent estimate of 2010.

The non-oil economic sector of the Kingdom will play more and more of an essential role in the economy, especially as the government pushes for economic diversification that moves away from the oil section. This move should strengthen private consumption and will bolster the GFCF (or gross fixed capital formation).

The report expects GFCF growth to perform better than all of the other spending components of the GDP, beginning in 2011 and moving forward. Part of a long-term spending agenda, the government has plans for $155 billion in spending through 2011 focusing on infrastructure and education.

It was also stated in the report that the weak conditions of credit growth continue to present a risk to the growth potential of Saudi Arabia – at least until the new mortgage law comes into effect. In real terms, Saudi should see 3.5 percent growth in GDP from 2012 to 2015.

Saudi’s climate for investment is still a favourite of all those in the MENA region, according to the report.

The Kingdom enjoys relative stability in the political realm, has great potential for growth in infrastructure and other capital saturated sectors, controls extensive reserves of oil and has good capacity for production. These factors are supporting the report’s positive outlook.

In addition, the Saudi government’s plans for spending will also draw investors in the coming five year period, as there are plans for $1.3 trillion in investments made mainly in the non-oil economic sector. The report states that the implementation of these will create plenty of opportunities for employment and are bound to attract foreign investors, along with local ones, who have an idea of the growth potential of the Kingdom.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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