RIYADH, 2 January — The Saudi private sector is projected to grow 4.5 percent during the current year with the industrial sector leading the growth spurt. And the government will generate additional revenues of SR85 billion annually with the implementation of the gas initiative, according to an economic overview released by the Saudi British Bank (SABB) yesterday.
The study, entitled "Prospects for the Saudi economy: 2002", said potential benefits to the Saudi economy from the gas initiative could be huge. This is mainly because gas has been the fastest growing fuel with global consumption rising by 4.8 percent and production by 4.1 percent.
The study further said that the multiplier effects from the gas investment to construction and other support sectors could be wide ranging. But, how quickly the economy would benefit from the initiative is dependent upon the speed of implementation of the core venture agreements.
Predicting moderate increases in public sector spending, the study said the private sector would be largely responsible for any non-oil growth. The new foreign investment regulations have also been encouraging more private capital flows into the Kingdom.
The study said that the strength of the oil sector still dictates the underlying strength and growth prospects of the Saudi economy. Though economic diversification is taking place, the oil sector still contributed 44 percent of the nominal GDP in the year 2000 and almost 81 percent of the government’s total revenues of SR248 billion, the study said.
"If the oil price can be maintained above $22 a barrel in 2002 and Saudi Arabia does not have to reduce its output further, the current account should remain in surplus, perhaps in the region of SR6 billion — slightly down on 2001," said the 60-page report.
Saudi Arabia sits on the world’s largest oil reserves at about 260 billion barrels and is capable of sustaining the current level of production for over 90 years. The study said that historically the rate of new oil discoveries in Saudi Arabia has outstripped the depletion rate as known reserves 15 years ago were only 166 billion barrels.
Referring to the inflation rates and the cost of living in Saudi Arabia, the SABB study said inflation rates have been minimal, if not negative over recent years with reductions particularly in costs of fabrics, housing, entertainment and education. This is likely to continue with the cost of living falling yet again in 2002, but by less than one percent.
The study, which gives an overview of the Saudi economy with special reference to the oil and private sectors, also said that the Kingdom has consistently achieved a surplus over the last three decades in terms of merchandise trade. Preliminary figures showed non-oil exports increasing by around 10 percent in the year 2000. The new level is likely to be maintained in 2001 and 2001.
