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Surplus in Saudi Should Hit $25 Billion in 2011

Saudi Arabia : 02 May 2011

Saudi GDP to grow 5.8 percent and inflation to remain under 6 percent due to increased levels of spending.

A surplus of $25 billion (or 95 billion riyal / Dh 91 billion) will be posted in Saudi Arabia for 2011, even with record amounts of spending in the Kingdom. A state-run bank announced these figures recently based on an average price of $95/barrel for oil. The largest economy in the Arab world put out another massive budget in 2011, the third in a row to set record highs. Plans for 580 billion riyals in spending were announced, as well as additional fiscal handouts totaling more than $100 billion marked for infrastructure and various projects.

Surplus estimates are forecasted to hit almost 95 billion riyals even with government expenditures of almost 846 billion riyals, according to Saeed Al Shaikh, chief economist at the NCB (National Commercial Bank).

Al Shaikh spoke at a Jeddah press conference stating that the second quarter will see increased levels of business confidence across different sectors due to the increased levels of spending.

Optimism will increase among every variable, said Al Shaikh, including sales volumes, selling price levels, new orders and profit, which should all improve.

The Business Optimism Index was released last week by the NCB who collaborated with Dun & Bradstreet on the report covering Q2 for 2011. The report surveyed 500 Saudi businesses and exposed record levels of optimism in the non-oil industries.

The non-oil economic sector increased to 68 points for Q2, up from 65 points in Q1 and reaching the highest level seen since the survey started in Q1 2009. The composite index for manufacturing climbed from 64 points to 70 points.

The construction sector in the Kingdom was boosted from 66 points to 71 points due to state plans for increased developments in infrastructure.

Al Shaikh stated that higher levels of oil production, forecasted to hit 9 million bpd this year, would result in 5.8 percent GDP growth for Saudi Arabia. The non-oil economic sector will also climb 5 percent due to the government spending and push on infrastructure developments.

Inflation decreased from 4.9 percent last March to 4.7 percent this March, but is forecasted to increase due to rising spending. Al Shaikh noted that inflation is not expected to surpass 6 percent.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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