Even at growth of 3.4 percent, Saudi Arabia’s economy will be the envy of most other large countries. That figure is above the average expected GDP (3 percent) of the G20 nations – of which the kingdom is one – according to Moody’s. And, waiting in the wings, is Saudi Arabia’s vast foreign reserves, which by October had amounted to a colossal $628bn, an impressive 17 percent increase on end-2011. That sum can easily alleviate any short-term problems that may occur if the global economy hits the buffers next year, or if the oil price slumps unexpectedly.
However, the concern for Saudi Arabia lies not in 2013, but further down the line. The fear is that the spending to which the kingdom is fast becoming accustomed will be more difficult to justify in around five years’ time. In October last year, the International Monetary Fund (IMF) warned all the GCC nations that the pace of government spending needed to be scaled down to “ensure long-term sustainability” in the face of weakening oil prices. The agency projected a fiscal deficit of 0.6 percent of GDP in 2016, if Saudi Arabia continues down its current path, as opposed to the 14 percent surplus the kingdom reported in 2012.
