Saudi Arabia’s real GDP is projected to swell by nearly 6.9 per cent this year to record its highest growth rate in eight years as a result of a surge in oil production and public spending, a bank report has said.
Actual public expenditure could leap by a third in 2011 to record its highest increase since 2000 as the country implements an enormous public financial incentive announced by King Abdullah early this year, Saudi American Bank Group (SAMBA) said in its monthly economic bulletin.
“Saudi Arabia is set for the strongest rate of economic growth since 2003, driven by double-digit growth in crude oil output and sizeable gains in government spending,” said the study.
It projected non-oil sector growth at over 5 per cent, while the hydrocarbon sector could record double-digit growth due to higher output and prices.
The report showed the oil sector has expanded at an exceptional rate so far this year and its contribution to the GDP is likely to grow by over 11 per cent in real terms, the highest growth rate since 2003.
“The main driver has been crude oil production, which has been ramped up in response to the outage of Libyan crude.
Average crude oil production was running at 9.2 million barrels per day in the first nine months of 2011, around 12 per cent higher than the corresponding period of 2010,” it said.
It added that production appears to have peaked in the summer at around 9.9 million bpd and most analysts see Saudi output easing in the remaining months of the year as Libyan crude is ramped up, albeit slowly and haphazardly.
The report expected growth to slow to about 4.1 per cent in 2012-2013 as oil production eases and the pace of government spending moderates somewhat.
At current prices, Saudi Arabia’s economy, the largest in the Arab world, is forecast to grow 29.2 per cent to $557 billion in 2011 from $431 billion in 2010.
SAMBA expected the GDP to slim to around $544 billion in 2012 before sharply rebounding to nearly $587 billion due to an expected rise in crude prices.
Higher oil exports will also allow Saudi Arabia to record a much higher current account surplus at 24.4 per cent of GDP in 2011 compared with 15.7 per cent in 2010.
It also projected the budgeted deficit to turn into a surplus of 13.1 per cent of the GDP in 2011 against 5.4 per cent in 2010 and a deficit in 2009.
Saudi Arabia sits atop more than a fifth of the world’s proven crude deposits. SAMBA said the fiscal surplus would widen this year despite a massive rise in spending by the government, buoyed by high oil prices and production as well as a sharp increase in the country’s foreign assets.