Saudi GDP to soar 7.1% in 2011

Saudi Arabia’s real GDP could record one of its highest growth rates of 7.1 per cent in 2011 because of a surge in oil prices and higher output by the world’s dominant crude exporter, a local investment firm said on Monday.

The Gulf kingdom’s budget, which assumes a deficit of SR40 billion, will revert into a surplus of more than 10 per cent of GDP at the end of the year, the Riyadh-based Jadwa Investment said in a study sent to 'Emirates24|7'.

Jadwa said it had sharply revised up its earlier estimates of Saudi Arabia’s crude production this year from 8.8 million bpd to 9.2 million bpd, one of the highest output levels since the country began pumping oil seven decades ago.

“An upward revision to our oil production forecast is the main reason for the jump in our real GDP growth projection to 7.1 per cent from 5.6 per cent,” it said.

The study said Saudi Arabia, which controls over a fifth of the world’s proven crude resources, had already raised its oil output to long-term highs this year to compensate for the disruption to Libyan production.

Although Libyan output is resuming - it reportedly hit 350,000 barrels per day in early October -, Saudi oil production has remained high.

The study cited recent statements by Saudi oil minister Ali al Naimi, who said the kingdom’s crude production was 9.39 million barrels per day in September, compared to 8.1 million barrels per day in September 2010.

“We assume that Saudi production will fall in order to keep oil prices fairly stable while Libyan output is ramped up, but have revised up our projection for average production this year to 9.2 million bpd from 8.8 million bpd,” it said.

A GDP breakdown showed the oil sector is projected to swell by around 14.4 per cent this year while the private sector could grow by 4.2 per cent. The report forecast growth in the government sector at five per cent.

It showed high oil prices and production would boost Saudi Arabia’s revenue this year to nearly SR1,022bn ($272.5bn), its highest level after the 2008 peak income of SR1,101bn. The earnings this year are nearly double the budgeted revenue of SR540bn.

Spending is also expected to hit a record high of SR809bn, far higher than the budgeted expenditure of SR580bn.

“Even though government spending will jump this year, we have revised up our projection for the budget surplus to around 10.5 per cent of GDP (SR213bn) from 6.4 per cent of GDP,” Jadwa said.

“This is due to the increase in our oil production, and therefore oil revenue, forecast. It is also notable that domestic consumption over the first seven months of the year is down slightly on the same period of 2010, lifting the proportion of total production that has been exported.”

The report noted that public spending on existing projects has remained strong and that around SR160bn of expenditure announced in the Royal Decrees in February and March will take place this year.

“Based on our new oil production forecast, we estimate that the breakeven price for the 2011 budget, at which total revenues would cover total expenditure for the year, is around $76.4 per barrel (Saudi export crude).”

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