Infrastructure spending in Saudi Arabia is on the rise with 15 percent increases set to come in 2011 after $70 billion was spent for 2010, stated a recent report.
Government spending and fiscal policies in the kingdom are important drivers for the Saudi economy according to forecasts by Standard Chartered Bank.
This year the cabinet stamped its approval on $385 billion worth of spending to spread between 2010 and 2014 with much of that going to social service needs and infrastructure.
The report noted that the goal of fiscal policies for 2011 would be expansion as the population continues to rise and the government is committed to investing in infrastructure. Standard Chartered Bank calls the report “Global Focus for 2011.”
It is forecasted in the report that fiscal spending will increase by about 5 percent over last year’s $125.3 billion. Specifically the $70 billion in infrastructure spending should rise by 15 percent.
Rising oil prices and the plans noted in the previous commitments by the government are what will fuel these increases, stated the report.
The report also noted that increased infrastructure spending was healthy for the economy overall, especially when compared to growth in hydrocarbon expenditures. The filter-through effects are much more pronounced with infrastructure spending than the alternatives.
Investments and spending with the energy sectors is more concentrated and felt downstream, which will give the economy and Saudi job market a boost given the intensive labour needs of the sector as a whole.
Banking in Saudi is going strong as ratios for loans to deposit sit under 85 percent. This figure indicates banks have enough capacity for further lending and are not under the same constrictions as other institutions in the region who are maintaining higher loan-to-deposit ratios.
The “Doing Business Survey” conducted by the World Bank ranks the Kingdom in 11th place for the best levels of competition. The next most competitive Middle Eastern country is 17 places below Saudi in this survey.
Saudi Arabia is expected to hold onto the region’s leadership position throughout next year, despite pressures and improvement in Qatar, Bahrain and the UAE.
The domestic oil consumption levels remain challenging for Saudi, as those numbers have been steadily rising at 5.9 percent annually for the past five years.
Chief of the state’s oil producer has issued warnings that the levels of exported Saudi crude oil may start dropping during the next year.
Looking at other GCC member nations, the report noted that infrastructure spending in Abu Dhabi and Qatar were down. It was noted that many upcoming projects, delayed previously but set to begin within three years, will push the numbers in these states higher.
The long-term forecast for Qatar is especially positive as the government looks to invest almost $20 billion in roads and transportation infrastructure in the coming five year period. Another $36 billion project involving the metro system is currently in the works.
Qatar is also the site of a new airport facility worth $11 billion and a deepwater seaport worth $5.5 billion.
Short term benefits for the economy in Qatar will be the probable result of the nation’s winning bid for the 2022 FIFA World Cup. The report noted that this event will require boosted spending in infrastructure.
Projects within the UAE that have experienced delays but are now set to begin will result in $85 billion in increased spending. The quasi-sovereign organizations within the nation will experience a boost in project spending, but the levels of sovereign spending are also on the rise according to the report.
Abu Dhabi has the largest budget in the UAE stated the report. A decrease of $12 billion was seen in the 2010 budget that recorded $56 billion in expenditures, but the report noted that 2011 figures could rise as high as $65 billion or even $70 billion as developments are pushed forward.
Estimated values for developments within the UAE went from $47.1 billion last year to $61 billion for 2010. It was outlined in the report that the rise in spending was mainly due to the quasi-sovereign organizations within Abu Dhabi.
Kuwait is on the verge of a four-year plan of development which should see government spending grow for 2011, stated the Standard Chartered Bank.
The Kuwait Vision 2035 program took the first step with the plan approved back in February of this year. It included $104 billion in spending, which is only the first stage in a plan that sees Kuwait as a financial and trade hub within a quarter of a century.Paul Holdsworth, Staff Writer, Gulf Jobs Market News