Saudi economy seen at record high

Strong oil prices will ally with a sharp rise in crude production to boost Saudi Arabia’s economy by around $91 billion in 2011 to climb to a record high level in current prices, according to a key bank in the Gulf Kingdom.

The expansion will be coupled with a 5.5 per cent real GDP rise, the highest growth rate since 2005, when it expanded by around 5.6 per cent, Banque Saudi Fransi (BSF) said in a study on Saudi Arabia.

From about $434.7 billion in 2010, the country’s nominal GDP is projected to soar by nearly 20.8 per cent to $525.1 billion in 2010, it said.

It will be the highest GDP level in current prices but it will be overtaken in 2012, when the economy will swell to another record of $569.9 billion in 2012.

The report showed real growth would be in both the public and private sector, with the non-oil private sector expanding by around 4.2 per cent. The government sector is projected to grow by 5.6 per cent while the oil sector will likely surge by nearly 7.9 per cent, the report showed.

It attributed the high real growth to a surge in public spending, which is expected to hit an all time high of around SR842 billion ($227 billion) in 2011 following the announcement of massive royal handout for citizens worth nearly SR500 billion over the next few years, including the construction of 500,000 houses.

BSF said the surge in oil export revenue due to higher crude prices and output would allow the largest Arab economy to record high nominal GDP growth this year and achieve a fiscal surplus despite the surge in public spending.

It projected the budget surplus at around SR61.7 billion ($16 billion) as revenue will likely swell to one of their highest levels of around SR904 billion ($245 billion). Oil exports alone will fetch nearly $290 billion, their second highest level since the 2008 record oil income of $313 billion.

The report explained that oil export earnings normally exceed budget revenue because part of those earnings is retained by the government-owned Saudi Aramco for development projects and other purposes.

It showed the surge in oil revenue would be a result of a sharp in Saudi crude prices to an average $91 a barrel this year from $79.5 in 2010.

The Kingdom, the world’s dominant oil power which controls over a fifth of the proven global crude deposits, is also expected to boost supplies to an average 8.9 million bpd in 2011 from 8.16 million bpd I in 2010 to offset the stoppage in Libya’s oil exports due to the ongoing conflict there.

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