RIYADH, 30 March 2003 — With the war in Iraq heading for the long haul, a study on the Kingdom’s economy predicts that the GDP could fall. If oil prices — currently riding high at $32.50 — average at $17.50 a barrel after the war, with the US reining in the Iraqi oil price, Saudi GDP could plummet by as much as 5.22 percent, the study said.
Entitled “Saudi Gross Domestic Product: Review 2002-Forecast-2003,” the study by the Riyadh-based Consulting Center for Finance and Investment, points out that the assumptions for the forecast “are based on our in-house model whereby we ran a correlation between oil prices movement (Arab oil) and movement in oil GDP of Saudi Arabia since 1985.
“The correlation factor was 92 percent. Using this correlation factor as well as scenario analysis, we attempted to forecast the GDP for the year 2003.”
The situation is compounded by the fact that the economy is in urgent need of foreign investments. Immediate prospects are bleak as investors are wary because of the ongoing war.
