JEDDAH, 13 November 2006 — Saudi Arabia’s gross domestic product (GDP) grew by 6.5 percent in 2005 compared to 5.3 percent in the previous year while its budget surplus amounted to SR218 billion, the Saudi Arabian Monetary Agency (SAMA) announced yesterday. Presenting SAMA’s 42nd annual state of the economy report for 2005 to Custodian of the Two Holy Mosques King Abdullah in Riyadh, its governor, Hamad Al-Sayari, emphasized the growing strength of Saudi economy and noted increasing investment in all vital sectors.
King Abdullah expressed his delight over the positive economic report and commended SAMA’s role in carrying out the Kingdom’s monetary policies. Intelligence chief Prince Muqrin, Finance Minister Ibrahim Al-Assaf and other senior officials attended the Al-Yamamah Palace ceremony.
Sayari described the Kingdom’s admission to the World Trade Organization (WTO) as one of the major economic achievements of 2005. “It was an important step toward integrating into the global economy, attracting foreign investment, opening and expanding markets and strengthening the competitiveness of the national economy,” the SAMA chief said.
Saudi Arabia formally became the WTO’s 149th member on Dec. 11 after 12 years of intense negotiations. The Kingdom had adopted 42 new regulations and measures as part of its efforts to join the international trade body. Of these, 19 were related to the main WTO agreements.
“The national economy is moving in the right direction, taking quick but firm steps, in order to achieve greater strength, competitiveness and diversification and creating more job opportunities for citizens. And all these factors will ensure continuous growth,” Sayari told the king.
Referring to growing foreign investment, Sayari said it reflected the strength of the Saudi economy and the Kingdom’s investment-friendly climate. “Part of these investments came through the capital market, which offers additional channels to finance projects and new investment tools for those who have savings,” he added.
While commending the government’s efforts to strengthen the capital market by acquiring advanced equipment and facilities and increasing the number of financial firms operating in the market, Sayari hoped that these measures would inject confidence among investors. He stressed the need for more efforts to enhance awareness of people dealing in the stock market. He commended Abdullah for taking the initiative to modernize the Kingdom’s rules and regulations, restructuring the national economy and approving a number of giant development projects.
Sayari was apparently referring to the economic city projects in Rabigh, Hail, Madinah and Jizan, which are likely to mobilize foreign and domestic investment worth more than SR250 billion and create more than a million new jobs. The SAMA governor also praised the king for issuing a new law to streamline succession. “This law will reinforce stability and strengthen the basic principles of governance and will have a positive impact on the citizens’ security and prosperity,” he pointed out.
In his keynote speech, Sayari noted the role being played by the Supreme Economic Council, a mini Cabinet chaired by the king, in taking the national economy to new heights. “Since its formation in 1999, the national economy gained an average annual growth rate of 4.2 percent, overtaking the population growth rate of 2.5 percent,” he pointed out. The private sector made an annual average growth rate of 4.6 percent during the past six years.
Spelling out the major economic achievements in 2005, the SAMA chief said: “The actual GDP grew by 6.5 percent compared to 5.3 percent in the previous year. The actual private sector GDP increased by 6.6 percent while the public sector GDP soared by 7.2 percent.” The Kingdom’s balance of payment surplus in current accounts rose to SR338 billion in 2005 on the back of growing oil prices and nonoil exports. The figure was almost the double of SR195 billion surplus gained the previous year. As a result, the currency basket rose by 11.6 percent.
Sayari said prices of most local products remained stable throughout 2005 when the general cost of living index rose by less than one percent. “The economy is continuing to maintain these positive results at similar levels this year,” he added.
He said the Kingdom achieved this positive economic growth despite internal and external challenges. “The number of young Saudi men and women under 30 accounts for 60 percent of the population. This demands greater efforts to provide them with educational, health and other facilities and services,” he explained.
He noted the king’s instructions to ensure transparency by publishing economic data and information and making them available to those who seek them. “This will strengthen the Kingdom’s credibility and assist in diagnosing the economic condition. We are confident that your efforts to restructure economy and expand private sector activities will boost the national economy further,” Sayari told the king.
Economist Ihsan Bu-Hulaiga, who is a member of the Shoura Council, said the SAMA report would have a significant impact in terms of winning confidence of foreign investors. “This is a major annual publication that covers Saudi economy from all aspects which makes it very important internally and externally for analysts, economists, academics, companies, embassies, etc. since it is published in Arabic and English,” Bu-Hulaiga told Arab News.
He expects the positive economic trend registered in the SAMA report to continue. “I think the Saudi economy will continue to grow and the budget to enjoy record surplus, thus reinforcing the flow of new development projects as well as private investments,” he added.
Nahed M. Taher, chief executive officer of GulfOne Investment Bank, told Arab News: “This is still relatively healthy growth. However, I believe the multiplier of liquidity driven by high oil revenues was generating less income this year. This multiplier went down from 1.4 to 0.74 in the last three years. So the investment channels are not really in the productive sector of the economy as we hoped for and definitely it translates into the burning of money and portfolios in the stock market.”
— Additional input from Khalil Hanware and Maha Akeel
