Loading ...Saudi oil revenues expected to reach $260b this year |
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JEDDAH -- Saudi Arabia's oil revenue is expected to reach $260 billion this year as against an average of $43b per year throughout the 1990s and amounts to nearly $700 million per day, according to the monthly report by Jadwa Investment (JI)
The Riyadh-based JI report on Monday said that the lower oil prices in 2009 and 2010 mean that some of the headline numbers will not look as good, but the underlying picture will remain very healthy and in real terms economic growth will be stronger. It added that non-oil export growth may slow modestly in response to lower global petrochemical prices.
It said that the rising oil prices are expected to have a positive impact on the Saudi economy. The current account surplus may touch an all-time high this year and economic growth and the budget surplus will also be exceptionally strong.
Total exports are now projected at $290b, compared with just $39b in 1998.
The report said that higher global food prices meant that the food import bill for January of this year was 44 percent higher than that for one year earlier. Prices of many foodstuffs have subsequently moved even higher. In total, imports are likely to grow by 30 percent this year. However, this will be outweighed by the jump in oil revenues and the current account surplus will reach an all-time high of $127b in 2008.
The current account surplus will be reflected in a further jump in foreign assets. The holdings of foreign assets of Saudi Arabian Monetary Agency (SAMA) have climbed by over $10b per month in each of the six months to February. According to Jadwa, total foreign assets are expected to exceed $475b at the end of this year, up from just $73b at end-2002.
Higher oil revenues will also increase the budget surplus and are expected to reach $69b in 2008, the second largest ever.
Soaring oil prices and worsening inflation are putting pressure on the government to increase spending. Saudi Arabia 's inflation rate increased to a 27-year peak of 9.6 percent in March as against 8.7 percent in the previous month and just 3.1 percent in June of last year.
The Council of Ministers recently adopted short- and long-term measures to control increasing prices and inflation. In addition to a package of measures to alleviate the impact of inflation, including a public sector pay rise, announced in January, the government said at the end of March that it would finance a cut in the tariffs that importers pay on 180 foodstuffs, building materials and other consumer goods.
The Jadwa report said by adding to money supply growth and tightening various supply bottlenecks within the economy, higher government spending will feed into inflation, which is continuing to rise at an alarming pace.
"We do not think that inflation will have too much of a negative impact on economic performance as it is the dynamism within the non-oil sector that is responsible for much of the run-up in prices. Our forecast for real GDP growth remains unchanged at 5.5 percent owing to strong growth in the manufacturing, construction, transport and communications sectors," said Brad Bourland, chief economist at Jadwa Investment.
"Higher oil revenues will allow greater government spending but the effects of this will be offset by the delays in many new projects and the impact of inflation on consumer spending," he added.
In nominal terms, Saudi Arabia 's GDP is likely to grow by 22.1 percent this year, the second fastest rate since 1990. At $457b, the Saudi economy will be three times larger than it was in 1998. The report said that expected fall in oil prices for 2009 will make economic performance look weaker compared with this year.
By our correspondent
© Khaleej Times 2008
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