Business | Opinion
Saudi Arabia's buying power
Recently-released statistics point out to exceptional economic results in Saudi Arabia in 2008 on the back of firm oil prices.
- By Jasim Ali, Special to Gulf News
- Published: 22:51 August 8, 2009
Recently-released statistics point out to exceptional economic results in Saudi Arabia in 2008 on the back of firm oil prices.
For instance, the gross domestic product (GDP) in current prices grew by a hefty 22 per cent on the back of exceptional rise of oil prices in the first seven months of the year. GDP in current prices or market exchange rate include effects of oil price rise but exclude inflationary pressures. Oil prices reached a record $147 per barrel in July 2008. However, oil prices dropped in the last five months of the year in the aftermath of the global financial crisis and the collapse of the subprime market in the US.
The petroleum sector, which includes crude oil and processing plus gas, is uniquely significant in the Saudi economy by virtue of comprising three quarters of exports, two thirds of treasury revenues and more than one third of GDP. To be sure, Saudi Arabia is the largest oil exporter in the world followed by Russia.
According to figures released by the Saudi Arabian Monetary Agency (Sama), GDP reached a record $468 billion in 2008, undoubtedly the largest in the Arab world. However, estimates by the Economist Intelligence Unit put the GDP in purchasing power parity rates at $591 billion.
In retrospect, Saudi Arabia's GDP in current prices amounted to $393 billion, $356 billion and $315 billion in 2007, 2006 and 2005, respectively. In other words, the kingdom's GDP increased by $75 billion, $37 billion, and $41 billion in 2008, 2007 and 2006, respectively. Changing oil prices explain size of GDP growth.
In addition, the year 2008 produced other outstanding results notably that of per capita income rising by 19 per cent to $18,847. Still, the EIU put per capita income on PPP basis at $23,692.
Nevertheless, Saudi Arabia has a long way to go to attain per capita par with Qatar, a fellow member of the Gulf Cooperation Council (GCC). EIU estimates put Qatar's per capita income at $67,348 in market prices but $58,635 in market and PPP basis, reflecting inflationary pressures.
Still, Saudi Arabia's budget posted a record surplus in 2008. Actual revenues increased by a hefty 144 per cent from $120 billion to $293 billion. Also, real total expenditures rose by nearly 25 per cent to $136 billion. As a result, the kingdom posted a record $157 billion surplus. In retrospect, Saudi Arabia registered surplus of $47 billion in 2007 and $71 billion in 2006, regarded the highest at the time.
For good reasons, Saudi authorities made proper use of the surplus to reduce outstanding debt to 14 per cent of the GDP, down from 19 per cent in 2007.
Yet the authorities are expected to address the outstanding economic results to address a pressing problem, namely unemployment. Total jobless figure stands around 11 per cent. However, by one account the unemployment rate is close to 25 per cent amongst females.
Undoubtedly, the government cannot overlook the employment problem amongst locals not least due to critical demographics. Some 38 per cent of Saudis are below the age of 14 and thus many youths would enter the job market in the years to come looking for suitable employment opportunities. The challenge relates to ensuring availability of job opportunities that meet the expectations of locals notably females with regards to working conditions and remunerations.
Saudi officials have reasons to celebrate the economic results achieved in 2008 notably growth of the GDP and per capita income. Nevertheless, the celebrations won't be complete with a pressing jobless headache amongst youths and particularly females.
- The writer is a Member of Parliament in Bahrain.
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