Saudi Arabia: $163 billion oil revenues

According to Saudi American Bank's latest economic analysis on the Kingdom, oil revenues this year are expected to reach $163 billion realising a current account balance of $101 billion.

Samba chief economist Brad Bourland says:

'We see a gradual yet continuous reduction of government debt to SR 595 billion, or 49% of GDP, and a continuous build-up of central bank foreign assets, which we forecast will stand at $141 billion at year-end.'

For each SR 100 within the Saudi monetary system, the country holds SR 150 in foreign exchange reserves says National Commercial Bank's chief economist Dr Said Al-Shaikh.

Saudi Arabia projects an average 4.6% annual economic growth over 2005-2009 backed by an expected 1.5% rise each year in the value of oil exports. GDP is projected to rise to SR895.2 billion by 2009 up 25% on 2004. The Kingdom's inflation target is 0.6%.

Higher real growth

Actual growth could be much higher. Official figures suggest Saudi Arabia, which plans to raise oil output capacity by 14% to 12.5 million b/d by 2009, is deploying very conservative estimates to guard against any falls in the crude oil price.

The underlying upward trend though is revealed by the government's raising of public sector salaries across the board by 15%. The move in the summer represented the first such increase for more than 20 years and an indication of government confidence that oil revenues will remain high.

The surplus is being put to good use with the government determined to continue its emphasis on stimulating the private sector and foreign direct investment to enable these to act as the locomotives of economic growth.

Saudi Arabian Monetary Agency governor, Hamad Al-Sayari, says the country's reform programme has helped the Kingdom's economy to register strong growth over the last three years with the substantial expansion in monetary supply and bank loans showing the increasingly dynamic role of the private sector.

Inflation risk

The government though is taking the lead to raise Saudi living standards even risking some modest price inflation as it extends its spending programmes. These emphasise a high degree of social spending particularly on education and health as well as investments designed to diversify from oil.

Multi-billion dollar industrial expansions are underway with petrochemicals and gas related projects to the fore. Plans for major new projects to exploit solid minerals, including phosphates and aluminium production, are also well advanced. These and other industrial ventures will lessen the dependence of the Saudi economy on its oil production even as the latter increases.

According to the Economics & Planning Ministry 'The projected total value of oil exports in 2009 will represent 34.9% of GDP against 39.7% in 2004.' The estimate is indicative of the vast opportunities opening up in one of the world's richest and fast expanding economies.