New York News: Saudi Arabia’s real GDP growth is expected to rise by 3 percent in 2013 driven by the decline in oil production.
Saudi Arabia’s growth in the nonoil sector will remain 7 percent in 2013, according to a new report by the National Commercial bank.
The Saudi Arabia’s real nonoil GDP in 2012 grew by around 7.2 percent, which is higher than the 10-year average of 4.7 percent, largely driven by the stellar performance of the nonoil private sector. The main drivers of private sector growth were the construction, manufacturing, and the retail sectors, which posted 10.3 percent, 8.3 percent and 8.3 percent annual growth, respectively.
This vibrancy of the private sector emanated from the royal decrees, the enhanced business confidence, and the improved financing environment. Strengthening of domestic demand is reflected in a rise in private-sector credit and the double-digit growth in merchandise imports.
The growth in manufacturing and construction benefited from the pickup in credit, receiving SR 14.5 billion and SR 5.6 billion, respectively, in incremental loans and advances from banks in 2012, which represents an annual increase of 13 percent and 8 percent.
Construction and manufacturing will remain the key beneficiaries in 2013, growing at 10.5 percent and 8.5 percent, respectively. The bank said projections for the two sectors are supported by buoyant activity in the projects’ market and strong business confidence.
According to U.S. government Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 17% of the world’s proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and 90% of export earnings.
Saudi Arabia is encouraging the growth of the private sector in order to diversify its economy and to employ more Saudi nationals. Diversification efforts are focusing on power generation, telecommunications, natural gas exploration, and petrochemical sectors. Over 5 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors, while Riyadh is struggling to reduce unemployment among its own nationals.
Saudi officials are particularly focused on employing its large youth population, which generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, most recently with the opening of the King Abdallah University of Science and Technology – Saudi Arabia’s first co-educational university. As part of its effort to attract foreign investment, Saudi Arabia acceded to the WTO in December 2005 after many years of negotiations.
The government has begun establishing six “economic cities” in different regions of the country to promote foreign investment and plans to spend $373 billion between 2010 and 2014 on social development and infrastructure projects to advance Saudi Arabia’s economic development
By. Ayesha Habib
New York News