A recently released October 2012 economic report by Jadwa Investment finds that a recent flow of data has been generally stronger than expected, and as a result of high oil production (which elevates the hydrocarbon sector growth to 6.1 percent for the year) Jadwa raises its projections for Saudi Arabia’s budget and current account surpluses. According to the report, Jadwa now expects the Saudi economy to expand by 5.8 percent in 2012.
[Editor’s note: click on any image in this item to view a slideshow of graphs from the Jadwa report]
“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. Higher oil production despite a difficult global environment will keep the hydrocarbon sector growthelevated at 6.1 percent this year. As a result, we have also raised our projections for both the budget and current account surpluses. 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.”
Noting that the Saudi economy remains on a solid growth path, Jadwa finds that while this year expansion in the Saudi economy is not likely to match that of last year, “it is more likely to register one of the highest growth rates among the G20 countries. Four factors have maintained a buoyant growth this year, namely (i) the hydrocarbon sector, (ii) expansionary fiscal policy with a significant positive impact on the non-oil private sector, (iii) solid domestic consumption and (iv) supportive bank lending to the private sector.”
[Editor’s note: click on any image in this item to view a slideshow of graphs from the Jadwa report]
Although the report finds prospects for recovery in advanced economies “weak,” prospects for emerging markets are much brighter, “though they will face a different set of issues which are likely to reduce their growth.”
[Editor’s note: click on any image in this item to view a slideshow of graphs from the Jadwa report]
[Click here to read the full report by Jadwa Investment as a PDF]
On the subject of private sector activity, Jadwa finds 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 (PMI) 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, implying that private sector activity is expanding at a strong pace. Within the overall index, the output PMI rose in September by 2.5 points to 65 compared to August reading of 62.5, while new orders gained 1.5 points to 70.2 in September. Given the strong domestic fundamentals particularly on the hydrocarbon and fiscal fronts, we expect the non-oil private sector to maintain a solid performance this year and expand by 6.1 percent.”
[Click here to read the full report by Jadwa Investment as a PDF]
