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Debt down, ratings up
Budget surpluses have occurred for four years in a row in the face of rising expenditure while, as a percentage of GDP, public debt has been cut from 92 per cent in 2003 to 30 per cent last year, according to the NBK.
Export led growth saw gross domestic product reach an estimated $345bn in 2006, while Saudi foreign assets have reached more than $230bn, which are funding long-term investments.
In the last year international credit rating agency Moody's has raised Saudi Arabia's sovereign rating to A2, while Standard and Poor's increased its Saudi ranking to A+ from A.
Oil demand is also expected to continue to grow steadily in line with global economic growth. By 2009, the kingdom is due to have production capacity of 12.5 million barrels per day, nearly 11 per cent up on today's levels. This, if prices are maintained or rise, will result in an increasing revenue stream.
A host of projects
The new found wealth is being carefully managed. Contrary to the inflation that followed previous oil booms, the variety of industrial investments, transport developments, the building of six new cities, as well as oil and gas ventures are certain to raise the absorption capacity of the economy.
In the next two years alone huge petrochemical projects for the Yanbu National Petrochemical Company, the Eastern Petrochemical Company and the Saudi Kayan Petrochemical Company as well as Saudi Aramco's petrochemicals venture are due to come on stream.
Mega projects and the kingdom's economic liberalisation are expected to see real non-oil private sector growth increase to an average of almost 8 per cent with construction, manufacturing and communications, as well as the financial sector, comprising lead elements.
Transport and communications are benefiting particularly from deregulation and should experience growth of more than 9 per cent a year until the end of 2010. Construction is also a big winner as result of the $300bn worth of projects under way or planned in Saudi. There are also intriguing prospects for private independent water and power investors.
There are some challenges ahead though as the kingdom is likely to experience a far greater degree of global competition from foreign companies following its membership of the World Trade Organisation.
However, Brad Bourland, Chief Economist of the Riyadh based Jadwa Investments, believes that while there are risks for the Saudi economy 'there is nothing significant enough to alter underlying positive developments. Much of the momentum through to 2010 comes from reforms that cannot be reversed, and an investment boom that can't be stopped in its tracks.'
See also:
Saudi economy becomes less dependent on oil
Saudi non-oil exports build new economy
