Saudi economy is resilient, says World Bank expert

Updated 07 February 2016
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Saudi economy is resilient, says World Bank expert

WASHINGTON: Saudi Arabia has five years’ worth of reserves at current spending levels and oil prices, Shantayanan Devarajan, chief economist of the World Bank’s Middle East and North Africa Region said in an interview with Tass.
“The fact is that Saudi Arabia did not cut back its oil exports when the price of oil plummeted in late 2014 (and stayed low in 2015). From an economic point of view, this strategy is sustainable only if Saudi Arabia can manage its fiscal policy so it doesn’t run out of foreign exchange reserves. At current spending levels, the estimates are that it has five years’ worth of reserves,” the expert said.
“The Saudi economy is as resilient as it is able to make the fiscal adjustments to respond to low oil prices. They have already announced the reduction of fuel subsidies,” Devarajan added.
Oil prices accelerated the decline early in January against the decision of the Saudi Aramco to increase discounts on its major blends for European consumers.
Brent price dropped by nearly 30 percent below $28 per barrel in the first three weeks of January but recovered lately to $35 a barrel.
A recent report from Jadwa Investment said that the Kingdom has maintained a high level of spending in the 2016 fiscal budget despite the global environment of lower oil prices.
Education and health care remain the focus of government spending, accounting for 35 percent of total spending.


Jubail petrochemical complex could lead to homegrown car industry

Updated 27 June 2019
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Jubail petrochemical complex could lead to homegrown car industry

  • Advanced Petrochemical said it signed a memorandum of understanding with SK Gas to build a propane dehydrogenation and polypropylene complex
  • The project is expected to produce high value plastics grades for the automotive industry as well as other specialized grades that are currently being imported into Saudi Arabia

LONDON: Advanced Petrochemical and South Korean SK Gas plan to develop a $1.8bn petrochemical complex in Jubail that could help plans to develop a homegrown car industry in Saudi Arabia.
It comes amid increased economic cooperation between Riyadh and Seoul following an $8.3 billion economic co-operation pact struck this week during the first visit of Saudi Crown Prince Mohammed bin Salman to South Korea.
The Saudi petchem producer said it signed a memorandum of understanding with SK Gas to build a propane dehydrogenation and polypropylene complex. The project is expected to produce “high value plastics grades for the automotive industry” as well as other specialized grades that are currently being imported into Saudi Arabia, Advanced Petrochemical said in a filing to the Tadawul stock exchange on Wednesday.

 

Separately the company said it has received propane feedstock allocation from the Kingdom’s Ministry of Energy, Industry and Mineral Resources for the project, which is slated to start in 2024.
Advanced Petrochemical also disclosed in a third filing that it was conducting a feasibility study for a cracker project in the Kingdom.
These latest deals reflect twin objectives to develop high-value manufacturing in the Kingdom to create jobs while also investing heavily in the petrochemicals sector to capitalize on rising global demand for high value plastics.
Saudi Arabia is the largest new automotive sales and auto parts market in the Middle East, accounting for an estimated 40 percent of all vehicles sold in the region, according to the US export.gov website.The addition of potentially as many as 3 million women drivers to the roads is expected to further spur domestic demand.
Saudi companies, spearheaded by Saudi Aramco, are investing billions of dollars in petrochemical projects worldwide to meet rising global demand. Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then, according to the International Energy Agency (IEA).
Demand for plastics — the key driver for the petchem industry — has outpaced all other bulk materials (such as steel, aluminum, or cement), nearly doubling since 2000, the IEA estimates.

FACTOID

40% - Saudi Arabia is the largest new automotive sales and auto parts market in the Middle East, accounting for an estimated 40 percent of all vehicles sold in the region.