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Country Report Saudi Arabia February 2011
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HTMLOutlook for 2011-15: Economic growth
Saudi Arabia's economy is forecast to grow by an average of 4.2% a year in 2011-15, a slowdown from the annual average of 4.9% during the 2003-08 oil boom, but a recovery from the low of 0.2% in 2009, when growth was constrained by oil production cuts. A number of major projects are expected to come on stream in 2012-15, including refineries and petrochemical plants, as well as two new offshore gasfields. The services sector has also shown signs of strong growth.
Oil output policy will remain a key determinant of economic growth, and relatively weak world demand for OPEC oil will constrain growth over the forecast period. Government spending will help to boost growth in the early part of the forecast period. Growth in the non-oil private sector is projected to pick up in 2011-15, averaging 4.8%, as it recovers from a tightening of bank lending (following the default of two major Saudi conglomerates) and as foreign direct investment (FDI) rises. Government spending, subsidised credit and public-sector contracts will support growth in this sector.
In terms of demand components, private consumption is forecast to expand robustly, underpinned by strong population growth and by expansionary fiscal and monetary policies. However, it will be lower than during 2006-09 owing to tighter credit conditions and persistent high unemployment. The public sector will continue to absorb a large proportion of job market entrants. Government consumption will slow as the private sector recovers.
The government will also drive strong increases in investment. Private investment growth will be stimulated by projects planned or under way. Foreigners will be an important source of investment, and inward FDI has remained relatively strong despite the weak global climate. Oil export growth will remain modest over the forecast period, but overall exports will be boosted by continued expansion of the petrochemical sector and other heavy industries, such as fertiliser and aluminium. Import volume growth will be stimulated by rising demand from ongoing infrastructure projects, particularly early in the forecast period, and a reliance on imports to meet many consumer needs. As ever, oil price movements pose significant risks, as does the spectre of more corporate defaults.
| Economic growth | ||||||
| % | 2010a | 2011b | 2012b | 2013b | 2014b | 2015b |
| GDP | 4.3c | 3.9 | 4.2 | 4.3 | 4.3 | 4.4 |
| Private consumption | 3.5 | 4.2 | 4.5 | 4.6 | 4.6 | 4.8 |
| Government consumption | 5.5 | 4.8 | 4.6 | 4.3 | 4.1 | 4.0 |
| Gross fixed investment | 4.0 | 5.9 | 5.5 | 5.0 | 4.9 | 4.4 |
| Exports of goods & services | 1.7 | 2.8 | 3.2 | 3.5 | 3.3 | 3.5 |
| Imports of goods & services | 3.3 | 5.5 | 5.4 | 5.1 | 4.8 | 4.5 |
| Domestic demand | 4.2 | 5.0 | 5.1 | 4.9 | 4.8 | 4.7 |
| Agriculture | 0.9 | 0.0 | 0.2 | 0.3 | 0.3 | 0.4 |
| Industry | 3.8 | 3.9 | 4.3 | 4.1 | 4.1 | 4.0 |
| Services | 4.0 | 4.1 | 4.5 | 4.5 | 4.6 | 4.8 |
| a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual. | ||||||
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