JEDDAH, 18 November 2004 — Four economic sectors in the Kingdom — imports & exports, tourism, foreign investment, and maintenance & spare parts — would be affected the most by the falling dollar prices, analysts have said.

“The import and export sector will be the worst affected,” said economist Dr. Yasin Al-Jefry. “The prices of any product imported in the country, using currencies other than dollar, will go up,” he pointed out. This will naturally result in increasing prices of imported goods in the Kingdom.

Sir Sidahmed, a Sudanese economic analyst, said he believed the dollar would remain weak throughout President George W. Bush’s second term as a result of his economic policies and programs.

But a senior GCC official ruled out the possibility of changing the linkage of GCC currencies with dollar before the formation of a common currency. “The linkage was a technical measure adopted to unify exchange prices of GCC currencies in preparation to launch a unified GCC currency by January 2010,” Dr. Nasser Al-Qaood, director of finance and monetary integration at the GCC Secretariat in Riyadh said.

According to analysts, dollar prices would continue to fall in the financial market despite Bush administration’s claim they wanted stronger dollar.

Dr. Anas Al-Haji said he expected dollar prices to go down seven percent against euro and yen within the next few months, adding that the euro would cross $1.40 mark and dollar would fall below 105 yen.

The Saudi economy will suffer in two ways: One because of the link between riyal and dollar and the other because of its oil deals international market are done in US dollar.

“Statistical analysis of Saudi economic statements in the past 30 years indicated that the fall in dollar prices will reduce purchasing power of its oil exports, rise inflationary levels and bring down growth rate,” Al-Eqtisadiah business daily quoted Haji as saying.

“The main incentive for the continuation of the linkage of Saudi riyal with dollar at 3.75 for more than two decades is that the dollar is the currency used for selling and buying oil at international markets and it will be easy to make plans,” Jefry said.

“This policy would be good so long as the dollar is strong. When it becomes weak it will double the cost and rise prices of Saudi imports from areas outside the influence of dollar,” he added.

Sidahmed said Saudi Arabia would achieve a record surplus in foreign trade this year, the largest in two decades. The volume of returns from exports will be four times more than the expenditures on imports as estimated by Samba.

“Taking into consideration of foreign transfers of expatriates as well as other services, the Kingdom can expect a trade surplus of around $40 billion, a figure it achieved during the peak of boom in 1981,” he said.

The dollar sank to a new all-time low against the euro and to a seven-month trough below 105 yen yesterday as markets remained concerned by the large US current account and budget deficits.

The single European currency rose to as high as $1.3036 in early European trading, exceeding a previous all-time time summit of $1.3005 scaled last week.

The euro later eased back slightly to $1.3032 against 1.2953 late on Tuesday in New York. Against the yen, the dollar fell to 104.67 from 105.35 on Tuesday.

US Treasury Secretary John Snow again reaffirmed his strong dollar policy, saying that currency devaluation was no way to achieve economic prosperity.

Speaking to reporters after a keynote speech in London, Snow also stuck to his well-worn message that while markets should set exchange rates, Washington is not seeking to weaken its currency. “No one has ever devalued their way to prosperity,” he said. He dismissed speculation of possible central bank intervention to slow the decline of the dollar, which sank to a new record low of 1.3036 per euro in early European trading yesterday. — Additional input from agencies