Kingdom defies global slump to post 7% economic growth

Finance Minister Ibrahim Al-Assaf has said the Kingdom achieved a growth rate of seven percent due to its sound economic policy and planning carried out with the private sector participation.
Delivering the welcome address at the eighth Euromoney Conference, which began in the capital yesterday, the minister said: "Although several countries experienced financial difficulties, the Kingdom was able to maintain political, economic and financial stability and security due to the wise economic reforms introduced by Custodian of the Two Holy Mosques King Abdullah."
Nearly 1,200 senior government officials, financiers and business leaders have gathered in Riyadh for the event, where Minister of Housing Shwaish Al-Duwaihy, Minister of Planning and Economy Muhammad Al-Jasser and Abdullatif Al-Zayani, secretary general of the GCC secretariat, also addressed the delegates at the opening ceremony.
" Fitch Ratings Agency raised the recent sovereign rating of the Kingdom to a higher degree (-AA) with a Positive outlook," the minister noted, stressing that the Kingdom will continue to strengthen the process of economic development by creating an investor confidence and a conducive environment to attract the private sector. Diversifying the economic base will provide more lucrative employment opportunities for local job seekers, he added.
"Saudi Arabia has acted to create a favorable environment for sustainable and competitive finance by strengthening its economic stability in recent years and continuing to use surplus budget revenues to strengthen the reserves and lower the public debt, which has now reached 3.6 percent of GDP. This in turn has helped to accelerate the pace of investment in infrastructure and strengthen our development goals," Al-Assaf said.
Al-Assaf also pointed out that the Kingdom maintains confidence and integrity in the financial sector and it wields a good control over the banks to perform its role in meeting the financing needs of the private sector. "The Kingdom has also taken a number of measures to support small and medium-sized enterprises as one of the important pillars in supporting employment and economic growth, including encouraging banks to provide banking services to these facilities. This has been achieved as a result of these efforts that grew funding provided by the Saudi Credit and Savings, which amounted to SR 300 million for 1,131 small projects during the first quarter of this year," he added.
With the introduction of mortgage finance, he said, the government is developing the local human resources to meet the growing needs in the relevant sector. The move toward greater competitiveness was one of the key issues highlighted across the panel of speakers. The continued growth of the economy — against a backdrop of global economic crisis – has been driven primarily by government spending, with government expenditure as a percentage of GDP rising from 29 percent in 2006 to 36 percent in 2012, even as GDP has expanded dramatically. However, policymakers are increasingly recognizing the limits of driving growth through government spending alone.
Speakers at the conference said that introducing reforms that encourage greater private sector investment, as well as creating wider choice in the market, were top priorities for the Kingdom.
Al-Duwaihy said the Real Estate Development Fund has provided 800,000 interest-free loans worth SR 224 billion. He recalled that his ministry had signed a SR 1 billion contract with a private sector national company to prepare the infrastructure for the construction of 7,000 housing units on a 5 million sqm land in Riyadh.
According to the minister, the first of its kind project is located on the Othman bin Affan street in the northwest of King Khaled International Airport in Riyadh. The project is being implemented following the royal directive to allocate lands for the housing ministry to help citizens with loans to build homes, he added.
The project which is to be completed within 24 months, will provide water, power, sanitation, wastewater and sidewalks for pedestrians on an area of 350,00 sq m. Provisions have also been made for schools for boys and girls, mosques and parks.
Al-Duwaihy said his ministry was framing regulatory measures for public and private sector partnerships. He said the government's vision is to provide house to every citizen of this country.
The minister outlined some of the steps necessary to resolve the housing challenges facing the country, which are exacerbated by the rising population and increase in expatriate demand for housing.
In addition to increasing the availability of housing, upcoming changes to the financial sector will enable more Saudi nationals to buy and own their own homes. This in turn will have important implications for the banking sector and will serve to increase the competitiveness of the economy.
Throughout the day, speakers referred to the need for the development of debt markets in Saudi Arabia in spite of the strength of the economy and the ongoing fiscal surplus. A number of speakers suggested that liquid and efficient debt markets would support financial sustainability and the development of the nonoil economy.
Other speakers on Day One included Abdullatif Al-Othman, governor and chairman of the board of directors, Saudi Arabian General Investment Authority (SAGIA); and Mohamed Al-Sheikh, chairman of the board, Saudi Arabian Capital Market Authority (CMA).
There were also interviews with top business leaders, including Ali Al-Barrak, president and chief executive officer, Saudi Electricity Company (SEC); Mohamed Al-Mady, vice chairman and chief executive officer, Saudi Basic Industries Corporation (SABIC); and Abdulrahman Al-Ibrahim, governor, Saline Water Conversion Corporation (SWCC).
Representing the global financial sector were Yahya Alyahya, chief executive officer, Gulf International Bank and chairman, Gulf International Bank (UK) Ltd.; Frederic Janbon, global head of fixed income, BNP Paribas; Mohammad Al-Tuwaijri, regional head of global banking and markets, HSBC Middle East and North Africa; and Sjoerd Leenart, chief executive officer for Middle East and North Africa, J.P. Morgan.