Government spending to boost Saudi Arabia GDP

Riyadh: Economic growth in Saudi Arabia, the largest Gulf Arab economy, could accelerate this year on the back of a projected rise in government spending, Riyadh Bank said in a research report.

The kingdom's fifth largest bank by market value expects gross domestic product to grow 4.3 per cent in 2007 compared to 4.2 per cent in 2006.

"Government budget spending has been on a roll ... Our forecast for 2007 is $116 billion, up around 11.5 per cent from the previous year," the bank said in the report received yesterday.

Inflation

Inflation, as measured by the cost of living index, is projected to rise to 2 per cent against 1.8 per cent in 2006, the bank said.

Saudi oil production is expected to fall from an average 9.12 million barrels per day in 2006 to 8.44 million bpd in 2007. "For 2007 ... we forecast oil prices to rise/fall by $3 per barrel," it said.

Government revenues are expected to reach $157 billion, against $107 billion projected by the government and $175 billion posted in 2006, it added. This would result in a budget surplus of $41 billion in 2007, against $71 billion in 2006.

Non-oil private sector growth would drop slightly in 2007 to 6 per cent in real terms against 6.3 per cent in 2006, the bank said.

4.3%: Gross domestic product to grow in 2007

2%: Projected rise in inflation

8.44m: Projected oil output in 2007 (in bpd)