Saudi Arabia’s economy recorded high growth in 2011 and is expected to maintain good performance through 2012 unless tension escalates in the Gulf because of Iran’s nuclear programmes.
Barring tensions, the economy of the world’s dominant oil power will not be affected by global turmoil given its massive overseas assets, which could peak at more than $636 billion at the end of 2012, Saudi Arabia’s largest bank, National Commercial Bank (NCB) said in its weekly bulletin.
“The Saudi economy witnessed a stellar performance last year and is expected to maintain its trajectory for 2012,” it said.
“The geopolitical tensions in the Gulf region remain a key risk factor to be considered for growth prospects. As global turmoil continues to hinder economies worldwide, Saudi is expected to maintain stable growth.”
NCB said last year’s sharp expansion in GDP in nominal and real terms was driven by the surge in oil prices, higher crude production, robust domestic demand, and prudent macroeconomic policies.
The non-oil private sector was stimulated by the series of royal decrees announced in 1Q2011, amounting to around SR400 bn in supplementary spending, with an estimated SR110 bn to have been spent in 2011.
NCB noted that last month Fitch rating agency affirmed the Kingdom’s long-term rating at an investment grade AA- with a stable outlook as the economy is expected to expand at 3.9 per cent this year, largely driven by the expansion in the non-oil sector and partially by increased oil production.
It said Saudi Arabia’s reliance on a single revenue source, oil, might affect sustainability on the long run. But it added that the country’s massive reserves in minimal risk assets guarantees the commitments the government has made towards balanced development.
“Net foreign assets are expected to reach $636.7 bn this year as the accumulation of US-denominated assets increase with growing Revenues,” the report said.