Saudi Arabia country political and fiscal forecast
The rule of the Al Saud family is likely to face a number of challenges in 2011-15, including a potentially fractious succession process and wider demands for political reforms. Small groups may mobilise to protest against specific issues, such as youth unemployment or Shia rights, while refraining from directly challenging the position of the Al Saud. The political succession remains a source of uncertainty—the focus on transferring power to the grandsons, rather than the sons, of Abdel-Aziz, the founder of Saudi Arabia, will increase.
Iran’s nuclear programme and its regional influence will be Saudi Arabia’s most pressing security concerns. The two countries will compete for influence and this will often translate into actual or perceived backing for rival Sunni and Shia groups, raising sectarian tensions throughout the region. The stability of Yemen will be a growing security concern as an offshoot of al-Qaida has gained a foothold there.
Steady population growth will put pressure on infrastructure, housing and services over the forecast period. The private sector will remain overwhelmingly dependent on foreign workers, owing to local skills shortages, although the government will seek to broaden “Saudiisation” requirements. In an effort to appease popular disquiet at high unemployment and housing shortages, the government will boost public-sector employment and embark on a huge house-building programme, but with a detrimental impact on the public finances.
Real GDP growth is forecast to average a rapid 5.2% a year in 2011-15, boosted in large part by significant fiscal stimulus. Oil will remain the mainstay of export earnings and of government revenue, leaving the economy vulnerable to external shocks.
Growth in the public sector is likely to outstrip that in the non-oil private sector in 2011, owing to major social spending programmes announced by the government in February and March. However, non-oil private-sector growth will be the main driver of economic expansion from 2013, boosted by the growing role of private firms in infrastructure and industry projects. Investment will focus on natural gas and refined oil, infrastructure and energy-intensive industries such as petrochemicals, metals, fertilisers, plastics and packaging.
A rapidly expanding and relatively affluent population makes Saudi Arabia one of the more attractive consumer markets in the region. The growing population, coupled with rising average incomes, will continue to feed demand for infrastructure and services, notably energy, water, telecommunications and technology, housing, health and education. There are opportunities for foreign participation in all of these sectors.
Key indicators 2010 2011 2012 2013 2014 2015
Real GDP growth (%) 3.8 6.5 5.0 4.9 4.7 4.8
Consumer price inflation (av; %) 5.4 8.0 3.0 3.8 4.2 5.1
Budget balance (% of GDP) 6.5 10.1 0.5 -4.3 -6.5 -6.3
Current-account balance (% of GDP) 15.9 22.6 13.7 9.1 5.6 4.3
3-month deposit rate (av; %) 0.6 0.8 1.2 2.0 3.1 3.2