Saudi economy seen recovering in Q4 - Jadwa

Saudi Arabia's economy will see a "sustainable recovery" starting in the fourth quarter of the year, a new report has said.

In the latest update by Jadwa Investment on the kingdom’s economy, it said the rebound would happen “barring any other major public financial events at family businesses", referring to the troubles of the Saad Group and Algosaibi.

The global recession had hit the Saudi economy hard through the early part of 2009 and local business confidence was damaged by the high-profile troubles at the two companies, Saudi Gazette reported on Wednesday, citing the report.

However, recent data suggested that the “worst is now over for the economy", the report added.

"Based on our assumption that external conditions will continue to get better, then barring any other major public financial events at family businesses, we expect a sustainable recovery to take hold in the fourth quarter,” Jadwa Investment said.

The report pointed out that inflation had fallen sharply this year as the external factors behind its surge over the previous few years all reversed.

“There is sufficient slack in the economy to prevent domestically-driven inflation outside of the rental market for some time, but with commodity prices rising and the dollar slipping as global economic growth resumes, we do not expect inflation to fall much lower than its current level of 4.2 percent over the remainder of the year,” the Jadwa report added.

It noted that the difficult economic environment has hit the financial performance of listed companies. Earnings per share for the first half of the year were 24.3 percent lower than for the same period of 2008.

Although the economy “has slowed,” the report said the bright spot was the contribution of the government.

“Government spending looks to have been well above target, which is providing a vital boost for some private sector contractors.”

It added: "We think that the economy is in the midst of a period of consolidation during which confidence should improve.”

READERS' COMMENTS

MORE FROM ARABIANBUSINESS.COM