Higher oil prices, a deep tariff cut and economic reforms are set to give Saudi Arabia’s economy a second year of strong growth, an economic report said.
The report by the Saudi American Bank (Samba) said that the Saudi economy, which grew by 4.5 percent in real terms last year, was expected to achieve a one percent gross domestic product (GDP) growth in 2001, according to the Gulf Daily News on Saturday.
The outlook for 2001 is bullish positive GDP growth even after a year of exceptional growth in 2000, another budget surplus and a trade surplus, all with low inflation, low interest rates and the riyal strengthening against the euro, yen and pound, the report said.
“We forecast negative growth and a small budget deficit in our last report in February, 2001 ... We now forecast real GDP growth of one percent this year and nominal GDP growth of one percent,” it added.
Saudi Arabia has been pushing ahead with economic reforms aimed at opening up its economy and attracting foreign investment.
In a report issued earlier this year, Samba forecast a $22 a barrel oil price in 2001 and said that weaker crude prices were likely to give Saudi Arabia a two percent negative economic growth and upset the kingdom's deficit-free budget in nearly two decades, said the paper.
But the average price for Saudi oil during the first half of the year was $24 a barrel.
The government budget balance, which was forecast to have a slight deficit in the bank's last report, is likely instead to have a surplus of seven billion riyals ($1.86 billion), given oil revenue strength at mid-year, the report said.
The report also said the government budget for 2001 was likely to post a surplus of 7bn riyals ($1.87 billion).
The current account surplus, forecast at $3 billion in February, has been revised to $4 billion, the bank added.
It said that a combination of factors had contributed to the revised economic outlook.
These include deep tariff reductions, lower local interest rates, significant progress in the opening of gas development to foreign companies and other economic reforms, the report said.
Saudi Arabia in May cut tariffs on imported goods to five percent from 12 percent as part of economic reforms aimed at attracting foreign investments and maintaining economic growth.
In June, the kingdom signed preparatory agreements with eight international oil companies that are expected to attract at least $20 billion in investments in the kingdom's gas sector.
Samba said that work on the gas development, which was expected to begin in 2002, would have a significant impact on economic growth for several years to come – Albawaba.com
© 2001 Al Bawaba (www.albawaba.com )