Saudi 'least hit by oil price decline' - analyst

OIL PRICE: Declining values will not hit Saudi Arabia as much as other oil producing nations. (Getty Images)

Declining oil prices will hit Saudi Arabia’s GDP growth in 2009, but not to the same extent as other fuel producing nations, a leading analyst said on Tuesday.

Nassib Ghobril, head of economic research at Byblos Bank, told Arabian Business that continued government investment will see the kingdom suffering less in the coming months.

“You see the growth forecasts for GDP for Saudi Arabia from various resources saying there will be a slight contraction in growth. There is a slowdown in economic growth from previous years and there is the sentiment of declining stock markets, whether for Saudi or other nations,” he added.

Earlier this month, investment bank EFG Hermes predicted a 1.5 percent contraction in Saudi’s GDP following a 12.8 percent cut in oil production.

Since last summer, oil prices have plummeted to around $60 a barrel from $147 following weakening demand during the financial crisis.

On Tuesday, Saudi Arabia’s King Abdullah said between $75 and $80 a barrel would be a fair price for oil at the moment.

But Ghobril insisted current prices were more realistic based on the continuing depression. “A drop in oil prices earlier this year to very low levels was based on expectation that the recession is going to take years,” he said.

“These are over optimistic scenarios that the global economy will start growing in the last quarter of this year. I don’t believe this. It is excessive optimism at this stage and there is a lot of work to be done in the US before the economy turns around and grows.”

While no immediate spike in oil price or economic upturn is expected, Ghobril insisted Saudi is better equipped for the financial crisis.

“It’s a diversified economy and its population is larger than its expatriate base, which is not the case for other Gulf countries,” he said. “It has huge surpluses in terms of foreign reserves and oil revenues and an excellent Central Bank policy.

“We have seen the decline in the stock market last year, but as an economy it’s the largest one in the Gulf and entire world. It’s the most diversified of our oil producers and there has been less speculation in Saudi than we have seen in other markets across the Arab world.”

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READERS' COMMENTS

Double check the facts
Posted by National Banker, Saudi Arabia on Wednesday 27 May 2009 at 15:37 UAE time


“We have seen the decline in the stock market last year, but as an economy it’s the largest one in the Gulf and entire world......."

Really, the largest in the world? Hopefully that was a typo. Its the top 20 in the world but not the largest.
On a side note, I agree the Saudi economy is in relatively good shape and business as usual.

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