By Andy Sambidge
Jadwa Investment revises upward its forecast on back on higher oil production
Saudi Arabia's economy is forecast to grow by nearly six percent this year despite the prevailing global gloom, according to a new report by Jadwa Investment.
Analysts said it has revised upwards its forecast for the Saudi economy from 5.3 percent to 5.8 percent due to recent higher oil production.
"Despite the prevailing global economic gloom, the Saudi economy continues on a solid growth path. We have revised some of our 2012 forecasts to take account of a recent flow of data that has generally been stronger than we had expected," it said in the report.
Higher oil production despite a difficult global environment will keep the hydrocarbon sector growth elevated at 6.1 percent this year, it added.
"We maintain our baseline scenario which is centered on government spending leading non-oil growth to 5.7 percent this year. All in all, we now expect the Saudi economy to expand by 5.8 percent in 2012," Jadwa said.
Previously, Jadwa had forecast that Saudi Arabia’s crude oil production would average 9.6 million barrel per day (mbpd) in 2012 but the actual production level has been raised to a near record high this year with two months (April and June) recording an average production level above 10mbpd.
Jadwa said that while private sector activity eased in the first half of the year compared to a near record high in the same period last year, growth in the non-oil sector is expected to remain solid.
Despite month-to-month volatility, the purchasing managers’ index remained on a gradual upward trend since the all-time low of 56.3 recorded in September last year.
The latest PMI rose to 60.3 points from August to September, suggesting that private sector activity is expanding at a strong pace, Jadwa added.
Its report said higher production and higher oil prices ($109 per barrel) would generate record-high oil revenues of SR1,079.bn, or 44.3 percent of GDP, leading to a fiscal surplus of SR347.7bn in 2012, five percent higher than Jadwa's earlier forecast.