Kingdom's non-oil sector to drive growth in 2013-14

26 October 2013
DOHA -- Saudi Arabia's non-oil sector will be a key driver in the country's growth in 2013-14, the QNB Group said Friday as it released its economic report providing an insight into the Kingdom's economy.

The report, which looks at recent macroeconomic developments in the Kingdom,  presented a revised forecast of key economic indicators for 2013-14, it said.

According to the report, the Kingdom had the second best economic growth performance among the G-20 countries in 2012 at 6.8 percent which confirmed its strong performance over the last five years.

The Kingdom  registered the the third highest GDP growth among the G20 countries in 2008-12 at 6.2 percent, just below the growth rates of China and India.

The country's economic growth has led to social prosperity and wealth with GDP per capita at $31, 000 in 2012, which is above the Middle East and North Africa purchasing power parity at $31,000 in 2012, which was significantly above the Middle East and North Africa (MENA) average of $11,000 and close to the average for advanced economies of $41,000.

The Kingdom had the lowest risk spreads in the region. Its US dollar Credit Default Swap (CDS) spreads have dropped from an average of 137.3 basis points (bps) in January 2012 to 72.5bps in January 2013 and touched a low of 65.6bps in July 2013, based on its strong economic performance and very low debt.

The Kingdom also has high investment grade long-term foreign currency credit ratings from Moody's, Standard and Poor's (S&P) and Fitch, at Aa3, AA- and AA- respectively.

In May 2013, S&P upgraded the Kingdom's outlook to positive, reflecting its strong economic growth prospects.

QNB Group forecasts a slight slowdown in real GDP growth to 4.0 percent in 2013 as oil output declines due to weakening global demand. 

The non-oil sector will continue to grow strongly, reflecting government-led infrastructure and mining projects. Real GDP growth will pick up to 4.4 percent in 2014 with a slight recovery in the oil sector and continued strong non-oil activity.

Inflation is expected to remain moderate over the medium term. The current account surplus is projected to narrow in 2013 and 2014, as lower oil prices and production and higher imports reduce the overall trade balance.

The fiscal surplus will be lower in 2013 and 2014, reflecting lower oil revenue and higher government infrastructure spending.

The outlook for the banking sector remains positive as loan growth is set to pick up with brighter profitability prospects as interest rates trend up.

A PDF copy of the report is available on QNB's website at the Kingdom of Saudi Arabia Economic Insight 2013. Other recent QNB economic insight reports include UAE, Qatar, Kuwait, Jordan and Oman.

QNB Group operates in 26 countries in Europe, the Middle East and Africa as well as Asia and its economic reports leverage its knowledge of these markets to provide added value for its clients and counterparts.

© The Saudi Gazette 2013


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