Bank Report: Reform, High Oil Prices Bring about Boom in Saudi Economy
Strong oil prices coupled with a quickening pace of reform will help bring a 5.3 percent leap in GDP and a record $21 billion current account surplus in the Saudi economy this year, the kingdom's leading bank said in a report Monday, cited by the Gulf News.
The Emirati English Daily quoted the Saudi American Bank's mid-year report as saying the country was enjoying "its strongest year for oil revenues since the peak of the oil boom in 1981."
"This is by no means, however, resulting in a second boom in the economy overall, as the government is using the high oil revenues to restore fiscal health after 17 years of budget deficits and a cumulative debt that exceeds 115 percent of GDP," said the report.
"Nor are the high revenues derailing the aggressive reform agenda underway to spur the private sector," it added.
The bank said year-end figures will be "impressive, even assuming a substantial decline in oil prices during the second half of the year.”
It forecast that nominal GDP will grow by 20 percent to $169 percent and the real GDP will grow by 5.3 percent, the highest level since 1991.
The government's seventh five-year economic development plan running till 2005 predicts a 3.16 percent annual growth rate in gross domestic product.
The bank said the current account in the balance of payments will show a surplus of $21b.
However, Saudi American Bank cautioned that beyond the numbers, "the picture is more subdued for the economy as a whole.”
It noted that GDP growth was largely attributable to three oil production increases so far this year and that a forecast of 3 percent growth in the non-oil private sector is not enough to absorb all new job seekers.
After decades of assuming that having the world's largest oil reserves was a guarantee of prosperity, the Saudis are finally waking up, said a report by Business Week late July. Saudi Arabia is breaking a long-standing taboo and inviting in Western oil companies to explore for gas. The idea is to break the dependence on oil, which still accounts for the bulk of exports and government revenues, said the magazine.
Oil and gas form 30 percent of the kingdom’s gross domestic product, according to the ministry of planning statistics.
Oil prices and earnings have recovered from their low point in 1998, when the economy shrank 12%, said Business Week – (Several Sources)
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