By Andrew Sambidge
Business Monitor International says growth will be boosted by non-hydrocarbon sector
Saudi Arabia's economy is likely to grow by five percent this year, boosted by improved growth of the kingdom's non-hydrocarbon sector, Business Monitor International has said in a new report.
Analysts said the announcement of further investment in infrastructure projects had led them to revise upwards their forecast for real GDP in 2011 from 3.9 percent to five percent growth.
BMI's report also said it had revised its forecast for Saudi Arabia's fiscal position in light of the increase in public spending. It said it was now forecasting a drop into deficit of one percent.
On Tuesday, the International Monetary Fund said Saudi Arabia's short-term economic outlook was favourable but added that the kingdom should monitor inflationary pressures following a recent increase in social spending and soaring food import prices.
The kingdom, which depends on oil for 86 percent of its revenue, announced increases in government spending in March as protests calling for more job opportunities and democracy engulfed the Middle East.
The package included $67 billion on housing and funds for the military and religious groups that backed the government’s ban on domestic protests, and followed a $36 billion handout announced on February 23.
Business Monitor International said the handout would make large-scale protests in the kingdom very unlikely although youth unemployment remained a concern.
Its report added: "Saudi Arabia’s non-oil sector will play an increasingly vital role for the economy, as the government’s initiative to diversify the economy away from the hydrocarbon sector will bolster private consumption."
It said that it saw the country's banking sector improving its performance following modest growth last year.
"We are confident that a recovery will occur throughout 2011 and forecast asset growth to pick up and come in at eight percent, compared with a modest 2.5 percent in 2010," BMI said.