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Saudi Arabia Business Forecast Report Q2 2014 - New Market Study Published

New Country Reports research report from Business Monitor International is now available from Fast Market Research

 

Boston, MA -- (ReleaseWire) -- 04/15/2014 -- Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up key bases of support given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment, coupled with a lack of political liberties, mean that tensions will continue to linger.

N on-hydrocarbon growth in Saudi Arabia will remain buoyant over 2014, spurred by sustained domestic demand and the government's ongoing infrastructure spending. We retain our forecast for overall real GDP growth of 4.3% this year (moderating to 3.3% by 2015), but caution that risks are tilted to the downside. An uncertain outlook for the oil sector and disruptions linked to the government's 'Saudisation' policy could put pressure on headline growth over the coming quarters.

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Although balance of payments stability in Saudi Arabia is unlikely to come under any pressure in the foreseeable future, we expect the current account surplus to shrink substantially in the years ahead, falling from 23.5% of GDP in 2012 to 9.7% of GDP by 2018.

Developments in Egypt, Syria and Iran have disrupted relations between Saudi Arabia and its traditional ally, the United States. Although we expect the alliance to remain firm over the coming years, we note that Riyadh's foreign policy risks have increased, with the prospect of a US-Iran detente presenting a particular quandary to Saudi policymakers.

Key Risks To Outlook

The government's recent intensification of workforce nationalisation efforts (under a programme known as 'Saudisation') poses a downside risk to the economic outlook. We expect heightened 'Saudisation' measures to add to the costs for the private sector over the coming quarters, leading to an increase in project delays and a more difficult business environment overall.

A sharper-than-expected downturn in the global economy, if it was to translate into a substantial decline in oil prices, would pose significant downside risks to our forecasts for Saudi Arabia's fiscal and current account position, though it remains highly unlikely that either account will fall into the red in the near term.

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