The Saudi Arabian economy is likely to expand 5.5 per cent this year on higher oil output and state spending, Banque Saudi Fransi said, raising its earlier forecast of 4.2 per cent.
"The rise in oil output, coupled with greater state spending commitments has also heightened the prospects for higher GDP growth this year," Chief Economist John Sfakianakis of the Riyadh-based bank wrote in an e-mailed report today.
The bank also increased its inflation forecast to 5.6 per cent from 5.1 per cent on account of higher public expenditure.
Saudi Arabia, the world's biggest oil supplier and a Group of 20 member, is increasing spending on social security and housing amid popular uprisings in the Arab world. T
he country pledged to help ensure adequate crude supply to the market after violence curbed exports from Libya and raised output to 8.87 million barrels a day in February, a 3.3 per cent increase from January, the Organization of Petroleum Exporting Countries said in a March 11 monthly report.
Banque Saudi Fransi raised its 2011 state expenditure forecast by 25 per cent to 842.4 billion riyals ($225 billion), the report said. "The revised forecast also constitutes overspending of 45 per cent on the expenditure target set out in this year's budget, which would be the fastest pace of overspending in three decades."
King Abdullah, who returned to the kingdom on February 23 after three months of medical treatment, announced a 40 billion-riyal ($10.7 billion) increase in housing spending and allocated 1 billion riyals for the social-security budget.
Later that month, Abdullah made temporary state employees permanent and ordered government organisations to advertise jobs, state television reported. In the latest measure, the government said yesterday it will offer 4,000 plots of land suitable for building housing units in the northern province of Hail.
Crude has climbed almost 19 per cent this year, trading as high as $108.78 a barrel today.
Bloomberg News
