Country Report Saudi Arabia May 2011


Outlook for 2011-15

  • The rule of the Al Saud family will face a number of challenges in 2011-15, including a potentially fractious succession process and wider demands for political reform.
  • Some resentment of Al Saud rule will persist, but this is unlikely to translate into a unified national movement. However, smaller groups may mobilise around specific issues, such as youth unemployment and Shia rights.
  • Although the country's second municipal elections are scheduled for September, the Economist Intelligence Unit does not expect any democratic reform or any move to an elected parliament before 2015.
  • Saudi Arabia will take an active role in pursuing stability in countries it deems to be within its sphere of interest, but will continue to defer to the US on wider regional security issues.
  • Despite King Abdullah's announcement of US$129bn in state spending, we still expect the fiscal account to return a wide surplus this year, buttressed by high oil prices. However, the budget is forecast to move into deficit from 2013.
  • The fiscal boost that will be provided by recently announced state spending initiatives, combined with rising oil production, is forecast to lift real GDP growth to 6.3% this year and 5.3% in 2012.
  • We have lowered our inflation forecast, in line with official data showing that consumer prices rose by a lower than expected 5% year on year in the first quarter. However, we still expect average inflation to rise to 6.6% this year.

Monthly review

  • A further bout of protests has occurred in Eastern Province. Although several Shia protesters were arrested, the authorities have generally taken a less forceful approach in dealing with the protests than some of their regional peers.
  • A new media law has been issued by royal decree, which further tightens existing restrictions on media comment.
  • The upcoming municipal elections have attracted criticism from within the country over the exclusion of women voters.
  • Despite taking a leading mediation role in Yemen, Saudi Arabia has thus far failed to persuade the Yemeni president, Ali Abdullah Saleh, to stand down.
  • As part of government plans to liberalise the aviation sector, the Consultative Council has begun studying ways to stimulate the domestic airline market.
  • Saudi Aramco's board of directors has held its annual meeting in Seoul, the South Korean capital, in an effort to reinforce the message that it wishes to further strengthen energy links with the Asian nation.
© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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