Financial services report: Overview
Saudi Arabia, the Arab world's largest economy, will grow by an average of 5.4% in real terms from 2011-15 as oil prices remain high. The political instability that has stuck much of the rest of the Middle East and brought down governments in Tunisia and Egypt is unlikely to threaten the stability of the ruling Al Saud family in the forecast period. The financial services sector, including insurance and business services, accounted for 15.3% of GDP in 2010. In the first quarter of 2011, the contribution of financial services grew by 3.4% year on year and picked up by nearly 8% quarter on quarter.Saudi GDP per head is among the highest in the region but considering the large population, expected to reach nearly 32m by 2015, it is lower than some regional peers. Saudi GDP per head (on a purchasing power parity basis) will average US$26,150 in 2011-15, compared with US$42,461 in Kuwait, US$55,845 in the UAE or US$74,910 in Qatar. The
Saudi Arabian Monetary Agency
(
SAMA
, the central bank) will maintain the riyal's peg to the US dollar despite downward pressure on the US currency following a downgrade of US sovereign debt in 2011.
SAMA
may raise rates as a precautionary measure if inflation rises too quickly but in effect surrenders monetary policy to the Federal Reserve (the US central bank). Saudi Arabia will record sizeable current-account surpluses in the forecast period, meaning there will be ample reserves to defend the currency. Total foreign reserves, including gold, were US$490bn as of June 2011.Four of the Gulf Co-operation Council (GCC) countries (Saudi Arabia, Bahrain, Kuwait, Qatar) are proceeding with plans to set up a single currency in the region. The UAE and Oman pulled out of the project but could rejoin in the medium term. Several technical issues need to be agreed between members and we do not expect a single currency until 2015 at earliest.
| Income and demographics |
| | 2006(a) | 2007(a) | 2008(a) | 2009(a) | 2010(b) | 2011(c) | 2012(c) | 2013(c) | 2014(c) | 2015(c) |
| Nominal GDP (US$ bn) | 356.6 | 384.9 | 476.3 | 372.7 | 434.7 | 564.5 | 560.6 | 579.9 | 601.7 | 637.0 |
| Population (m) | 24.0 | 24.7 | 25.5 | 26.3 | 27.1 | 28.0 | 28.9 | 29.8 | 30.8 | 31.8 |
| GDP per head (US$ at PPP) | 21,816 | 22,212 | 22,935 | 22,574 | 22,822 | 23,943 | 25,058 | 26,082 | 27,267 | 28,403 |
| Private consumption per head (US$) | 3,954 | 4,546 | 5,196 | 5,199 | 5,465 | 5,908 | 6,306 | 6,637 | 7,050 | 7,499 |
| No. of households ('000) | 4,270 | 4,410 | 4,550 | 4,630(b) | 4,711 | 4,818 | 4,931 | 5,048 | 5,168 | 5,291 |
|
| Source: Economist Intelligence Unit. |
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