Report says kingdom's economy will be minimally affected by the global turmoil this year and bounce back in 2010
Saudi Arabia is well placed to survive the global downturn, a report from Bank of America Securities-Merrill Lynch (BAS-ML) has said.
The kingdom's GDP will shrink by 0.2% in 2009 but it will be relatively unaffected by the global economic turmoil due to its savings, lack of reliance on foreign trade and diversified economy. Saudi Arabia's 2010 GDP will bounce back to 2.8%, it forecast.
BAS-ML said: “We believe that its large savings and relatively low systemic risks offer sufficient room to pursue counter-cyclical policies. The large domestic market in a closed economy increases the effectiveness of these policies,” according to a report on ArabianBusiness.com.
Saudi Arabia remains the world's largest oil exporter and the commodity accounts for 31% of its GDP. However, the kingdom's fortunes are becoming less dependent on the oil market because it is developing other industries including construction, transport, finance, and communications.
It has also been careful with its spending in recent years. BAS-ML said: “The kingdom has been more cautious on spending than in past oil booms, saving 76% of the oil windfall between 2002 and 2008. Public debt fell from over 100% of GDP in the 1990s to 13.5% in 2008.”
Saudi is the largest construction market in the Gulf, with $400bn of projects planned or under way.