Jeddah: Saudi Arabia's economy will grow by 4 per cent this year as oil production increases, while inflation in the biggest Arab economy will stabilise at an annual average of 5 per cent, Samba Financial Group said Saturday.
Saudi Arabia is currently undergoing a $400 billion stimulus programme to boost its economy and create more jobs for the growing population of over 25 million.
"The recovery in econ-omic activity is gathering pace, with renewed strength in corporate fin-ance flows," economists at Samba Financial Group said in a report.
Real GDP and the non-oil sector should grow by 4 per cent this year, Samba said, citing higher oil production and improved lending to the private sector.
Saudi crude oil output picked up to 8.15 million barrels a day in May, the bank said.
"This is still slightly below the level reached towards the end of last year, but the trend is upwards and we expect production to average 8.27 mbpd [million barrel per day] this year, a 2 per cent increase on 2009," it said.
"Global agricultural commodities prices are softening quite rapidly, while inflation and inflationary expectations within Saudi Arabia's main trading partners are muted," it added.
Two weeks ago, the Saudi government's Central Department of Statistics said that inflation accelerated to a 12-month high in May as housing, fuel and the cost of goods and services increased. Inflation increased by 5.4 percent year on year due to higher rent and food prices, but is expected to stabilise at an average of 5 per cent throughout 2010.
The Saudi Arabian Monetary Agency last year cut the repurchase rate to 2 per cent, the lowest since 2004, and the reverse repurchase rate to 0.25 per cent as the global credit crunch led to a slump in oil prices, crimping growth.
