Saudi economy to grow just 3.1% next year - UBS

SLOWER GROWTH: The Saudi economy will have slower growth next year, with many state-owned companies expected to slash or delay big investment projects. (Getty Images)

The Saudi economy will grow 3.1 percent next year after shrinking 1.1 percent in 2009, UBS predicts.

The Swiss bank initiated coverage of the Saudi economy on Tuesday with a real GDP forecast that lies below the market consensus.

Saudi GDP is expected by the bank to contract 1.1 percent this year and post 3.1 percent growth in 2010.

This compares with a 0.3 percent contraction and 3.3 percent growth, predicted by an average of analysts polled by newswire Reuters on March 22.

The country’s economy expanded by 4.2 percent in 2008.

“We believe an improvement in the macroeconomic outlook and in financial market sentiment will depend crucially on a recovery in oil prices, which, in turn, will probably depend on more lasting signs of a global economic recovery,” a team of analysts wrote in a note to investors.

The forecast assumes a decline in the Brent oil price from $98.4 per barrel in 2008 to $51 per barrel in 2009, followed by $57 per barrel next year.

The production of oil and liquids is expected to fall 9.3 percent to 9.6m barrels per day in 2009 from 10.6m barrels per day in 2008, before rising 4.2 percent to 10.0 million barrels per day in 2010.

UBS said that although the Saudi Arabian government will support the economy through strong fiscal policy, many state owned companies are likely to add to the slowdown by slashing or delaying big investment projects.

This may be due to a more cautious assessment of future capacity requirements, or because companies relaunch tenders in order to benefit from falling prices for construction and raw materials.

“In particular, Saudi Aramco seems to have reassessed its $129bn investment

pipeline and has delayed and cancelled a number of projects,” the analysts wrote.

Other projects in the kingdom to have been delayed include power and water projects by Saudi Electricity Company and Marafiq.

Delays might also affect some of Saudi Arabia’s Economic Cities, UBS said.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM