THE KINGDOM'S Long-term Objective is to Create an economy Dominated by a Saudi workforce, that would take the country into new realms of economic efficiency
Saudi Arabia, the world's No.1 oil-exporter, remains in a healthy shape, with the exchequer's coffers swelling and output growth well above its long-term trend. This revenue bonanza offers opportunities to tackle socio-economic problems and make decisive progress in creating a world-class diversified economy, one capable of withstanding exogenous shocks and competing in global markets.
The past five years have injected new-found confidence in Riyadh to re-assert its political weight in the region, to accelerate microeconomic reforms--notably the liberalisation of the capital market and steady improvements in the foreign investment climate--as well as to implement ambitious investment plans, not just in the hydrocarbons sector. The net effect of these efforts is already positive: nominal gross domestic product (GDP) over 2003-06 averaged 16.5% per annum, with non-oil sectors expanding at a brisk pace. In fact, an economy greater than the size of Algeria or Egypt has been added to the Saudi economy since 2000. Inflation remained low, reflecting an open/flexible labour market and a liberalised trade system.
A prudent fiscal stance has engineered an unprecedented drop in the public debt burden to $97.6bn as of end-2006 (28% of GDP) compared to a peak of 119% in 1999. Last year, Riyadh recorded its largest ever 'twin surpluses' on the national budget and external current-account, totalling $70.7bn and $96bn, respectively. No wonder, foreign assets of the Saudi Arabian Monetary Agency (central bank) reached nearly $225bn by end-2006 (from a low of $42bn in 2002) and sufficient for three years of import cover. The oil price surge along with higher volumes of production boosted export receipts to $191bn in 2006, the biggest inflow of petrodollars in Saudi's history. In cumulative terms, earnings for the period 2002-06 totalled $682.34bn, compared with $295.56bn in 1997-2001, according to the International Monetary Fund (IMF) database. A combination of declining national debt and rising external assets leaves the country in a stronger position to achieve long-term fiscal sustainability.
Unlike during the 1970s and 1980s, when government spending fuelled growth, the Saudi private sector is now emerging as a major agent of economic activity. The Samba Financial Group, the kingdora's second-largest bank (by assets) commented: "The country is entering an era of its best growth ever, and it is balanced growth, with strength in the non-oil private sector. The capital inflows are mind-boggling, and unlike in the last oil boom, the petrodollars are being invested in the local economy." Samba forecasts that in 2007 private sector GDP will grow by 7.1%, with the highest-growth sectors being manufacturing (including petrochemicals) at 13%; transport/ telecoms at 11.8%; banking, insurance, real estate and business services at 10%; construction and wholesale/retail trade--recording 9.5% growth each.
The economy has proven resilient to stock market volatilities that wiped out paper wealth of...