Boston, MA -- (SBWIRE) -- 07/17/2012 -- Our outlook for the Saudi Arabian consumer sector remains bright, in line with the latest economic indicators. The Saudi Arabian economy is currently firing on all cylinders, as high oil prices, heavy government spending and buoyant consumer confidence continue to drive growth. Consumers in Saudi Arabia are benefitting from heavy government spending and easy monetary policy, and our outlook for household consumption remains upbeat. Across the board, consumption-related data paint a positive picture. Moreover, leading indicator data also remain broadly encouraging. The YouGov consumer confidence index is close to four-year highs. Government consumption will also remain a major driver throughout the year. It has long been our view that the political tension stirred up by the Arab Spring would lead to a sustained increase in public spending on healthcare, education and other social services, as a means placating the population. We have revised up our forecast for real GDP growth in 2012 from 4.6% to 5.3%, though we still expect growth to slow next year as the impact of government spending begins to fade.

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Headline Industry Data

- 2012 per capita food consumption growth in local currency = 9.0%; forecast growth 2011-2016 = 40.0%
- 2012 confectionary value sales growth = 12.0%; forecast growth to 2016 = 46.5%
- 2012 mass grocery retail sales growth = 11.7%; forecast growth to 2016 = 66.6%

Key Company Trends

Fast Food Attracting More Investments: The fast food sector in Saudi Arabia is continuing to grow in importance and is forecast to be worth around US$4.5bn by 2015. In May 2012 American burger chain Burger King opened their 65th and largest-yet Saudi restaurant in Riyadh. The Burger King brand is managed by HANA International, a subsidiary of Olayan Financing Company in the Middle East and North Africa. The company has said that Saudi Arabia is a key growth market, and that it will continue to be a focal point for their investment strategy in the Middle East.

Drinks Tax Ahead?

In May 2012 it was reported that the GCC states are considering a 50% tax on beverages and cigarettes to control consumption. At a meeting of health ministers held in Saudi Arabia, the tax was discussed, pointing out that soft drinks prices in the region are far lower than in most other parts of the world, and that the consumption of these drinks is a key factor in the spread of diabetes among children. If such a tax were to be implemented, it would have a major impact on the sale of soft drinks throughout the region.

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