Saudi GDP Growth Seen at 2.6%
World Economy

Saudi GDP Growth Seen at 2.6%

With the oil sector contributing little growth, Saudi Arabia’s real GDP growth is expected to grow by 2.6 percent in 2015 before dropping to 1.5 percent next year, a report said.
Meanwhile, 2017 could see a growth of 2 percent, which is likely to speed up to 3.8 percent in 2018, added the report, citing a study by Samba Financial Group, TradeArabia said.
Non-oil growth is expected to fall to 1.6 percent in 2016, before gathering pace again in 2017 and 2018 as rising oil prices restore some private sector confidence, the report said, noting that by 2018 the non-oil economy could be expanding at a rate of 5.4 percent.
Inflationary pressures are expected to remain muted over the next three years. Despite plans for a publicly-led surge in home-building, there remains a large deficit of dwellings, particularly at the affordable end, the report said.
External inflationary dynamics are likely to remain benign. A series of good harvests and decent growing conditions have seen agricultural commodity prices fall quite sharply this year. For Saudi Arabia, the most important commodities are wheat and sugar, both of which have come down in price, according to the report.
A strengthening dollar should help to keep a lid on most commodity prices for the rest of the year, the report said.

“Thus, although rental inflation will likely remain fairly robust, we think that this will be more than offset by weakening external pressures, and overall inflation is expected to remain comfortably below 2.5 percent through the forecast period,” the report said.
Saudi Arabia’s nonoil exports have suffered from the slowdown in China and a varied economic performance from its other main markets in East Asia.
The outlook for Chinese demand appears weak in the short run, but in the longer term the huge potential of the Chinese automotive industry indicates that demand for specialty chemicals of the type that Saudi Arabia has carefully invested in will grow. Other Asian countries should also continue to take in Saudi intermediate goods as demand for Asian manufactures in the US and, to a lesser extent the eurozone, picks up again, according to the report.
“Drawing these strands together, we expect Saudi non-oil GDP growth to ease to 4.5 percent in 2015, from 5.1 percent in 2014. This represents a slowdown from the five-year average of 6.8 percent, but remains decent and certainly compares well with most other emerging markets,” the Samba report said.

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