On The Wires: Saudi Arabia's economy will expand 5.3% on oil prices, National Commercial Bank says.
Rising oil prices to fuel expansion of Saudi Arabia's economy
RIYADH // Saudi Arabia's economy will expand 5.3 per cent this year, powered by higher oil prices and more government spending in the Arab world's largest economy, National Commercial Bank said.
The economy will grow 4.2 per cent in 2012, the Jeddah, Saudi Arabia-based bank said in an e-mailed report today. The kingdom will "benefit from the recent positive oil price shock" as it raises output 6.2 per cent to average 8.8 million barrels a day this year, compared with last, the bank said.
The kingdom, which depends on oil for 86 per cent of its revenue, announced increases in government spending in March as protests calling for more job opportunities and democracy engulfed the Middle East. The package included $67 billion (Dh 246bn) on housing and funds for the military and religious groups that backed the government's ban on domestic protests, and followed a $36 bn handout announced on February 23.
"The series of royal decrees announced in the first quarter 2011 will provide favourable stimulus to the non-oil sector, estimated to grow at 5 per cent," National Commercial Bank said. The construction and retail sectors will be "the key beneficiaries" of the new spending, it said.
The Saudi central bank Governor Muhammad al-Jasser said on March 24 that the kingdom's economic growth will exceed 4 per cent this year. That compares with growth of 3.8 per cent in 2010.
With higher oil prices, Saudi Arabia will record a budget surplus of 62.8 billion riyals ($16.8 billion), National Commercial said. Oil revenue this year is expected at 828.2 billion riyals, it said.
Saudi Arabia predicted on December 20 that its 2011 budget will have a deficit of 40 billion riyals. At the time, total spending was forecast at 580 billion riyals, according to the Riyadh-based Finance Ministry.
The break-even oil price required to balance the budget this year will increase to $84 a barrels this year from $65 a barrel last year, the bank said. Oil prices have increased 8.8 per cent this year. Crude oil for June delivery gained 68 cents to $99.65 a barrel on May 13 on the New York Mercantile Exchange.