Fast Market Research recommends "Saudi Arabia Business Forecast Report Q1 2014" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 12/24/2013 -- Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its 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.
We expect the Saudi Arabian economy to perform well throughout the coming quarters, on the back of minor gains in oil output and the continuing strength of non-hydrocarbon private sector economic activity. We forecast overall real GDP growth of 4.3% in 2014, up from an estimated 3.6% in 2013.
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 23.7% of GDP in 2012 to 9.8% of GDP by 2017.
Developments in Egypt, Syria and Iran have disrupted relations between Saudi Arabia and its traditional ally, the United States. Al -though 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.
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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 medium term, 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 were 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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