Boston, MA -- (ReleaseWire) -- 01/16/2013 -- Leading indicator data has not dampened BMI's positive outlook on the Saudi Arabian economy, reaffirming our view that Saudi Arabia's power sector will remain among the most dynamic in the Gulf Cooperation Council over the short-term. In addition, macroeconomic and demographic dynamics support a positive medium-to-long-term outlook. Announcements have prompted us to revise upward our capacity forecasts for the non-hydro renewable segment, namely solar. However, our outlook is more conservative than the one presented by the government, as we still believe that the existing regulatory environment creates downside risks for new projects.
With fixed investment and government spending continuing to grow apace, BMI's country risk analysts hold to their above-consensus forecast for real GDP growth of 5.2% in 2012 and have revised up the projection for 2013 from 4.1% to 4.5%. Heavy government stimulus has prompted an acceleration of activity more-or-less across the board, and our outlook for both domestic consumption and fixed investment remains broadly positive. Available macroeconomic data continues to impress, and we expect the economy to remain a regional outperformer in the near term, pushing power consumption.
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While the pace of growth achieved over the past couple of years (real GDP grew by an estimated 7.1% in 2011) will be difficult to sustain over the medium term, positive economic and demographic dynamics, coupled with sector-specific developments, will also continue to support an healthy growth outlook for the country's power sector in the coming years. This will push the government to expand and diversify its capacity generating infrastructure in the following ways:
- The country is already executing an extremely ambitious US$80bn expansion plan for power projects, with the Kingdom's Ninth Development Plan (2010-2014) aiming to raise generating capacity by 20.4 gigawatts (GW) by 2014. Even if BMI adopts a conservative stance and only 70% of the planned capacity comes online, our forecasts show that the country will be able to meet its commitments, with total installed capacity to reach just over 72GW by 2014.
- Plans to include non-hydro renewable sources, namely solar, have started to take shape in the Kingdom, with the country announcing in May 2012 that it is seeking US$109bn of investment. This is to be channelled into expanding its undeveloped solar industry - aiming to reach an ambitious target of 41GW of installed capacity by 2032.
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