JEDDAH, 28 October 2004 — Saudi Arabian Monetary Agency has predicted better economic performance this fiscal year on the back of growing crude oil prices and expanding private sector. In its 40th annual report presented to Custodian of the Two Holy Mosques King Fahd, SAMA emphasized the Kingdom’s monetary and banking system and stability of Saudi riyal.
Saudi economy grew sharply in 2003 as nominal gross domestic product rose by 13.7 percent, compared to 3.0 percent in the previous year, the Saudi Press Agency quoted SAMA Governor Hamad Al-Sayyari as saying.
SAMA forecast even better economic performance in 2004 “in light of high crude oil prices, as well as the continuing expansion in the private sector and the improvement in the domestic environment for investment.”
Private forecasts expect a budget surplus of as much as SR131.25 billion ($35 billion) in 2004, and the government has already set up plans to spend SR41 billion ($10.9 billion) of the windfall on welfare projects.
Public finances improved significantly in 2003, with the budget shifting to a surplus of SR36 billion ($9.6 billion) from a deficit of SR20.5 billion ($5.5 billion) in 2002. “This was due to rationalizing public expenditure and the improvement in revenues, including non-oil revenues”, Sayyari said.
The balance of payments registered a record surplus for the fifth consecutive year. It reached SR111.2 billion ($26.7 billion), in comparison with SR44.5 billion ($11.9 billion) in the previous year.
Inflation in the Kingdom last year stood at 0.6 percent. “This again reflects the strength of economy and its ability to overcome crises,” Sayyari said in reference to a series of terror attacks in the Kingdom since May 2003.
The SAMA governor said Saudi Arabia achieved remarkable progress toward joining the World Trade Organization. He said the new economic measures taken by the Kingdom would strengthen the private sector, which achieved a growth rate of 4.4 percent in 2003.
In his speech while presenting the report to King Fahd, Sayyari also noted the Kingdom’s efforts to stabilize world oil market by ensuring adequate supply and protecting the interests of both producers and consumers.
He attributed the record increase in crude prices to several factors beyond the control of OPEC countries. However, he said the revenues from surging oil prices would be used to strengthen the economic base, develop Saudi manpower and pay part of the public debt estimated at SR660 billion.
Sayyari stressed the government’s plan to achieve budgetary balance by controlling public expenditures and increasing non-oil revenues.
However, he called for more efforts to promote privatization, strengthen industries and small-medium-scale businesses and improve investment climate to attract domestic and foreign funds.
“I am sure that privatization will reduce financial burden on public budget, improve better utilization of resources, increase quality of services and create more opportunities for local and foreign investment,” he said.
Referring to progress made in the financial market, Sayyari said the standard price index rose by 76.2 percent in 2003 and 48.6 percent during the first half of this year. Saudi banks strengthened their financial position as bank deposits rose by 11.1 percent.
