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All is Sunny in Saudi
With oil prices on the rise, a promising real estate market and an impressive budget, things are looking good for the kingdom of Saudi Arabia
December 23, 2010 2:21 by Eva Fernandes
Though the spotlight does seem to be on Qatar now, what with them winning the bid to host FIFA 2022 and their plans to build billion dollar infrastructure to prepare for it, there is one other Gulf country that has been enjoying significant economic success during these troubled times. Yes, you guessed it right, we are talking about Saudi Arabia–the kingdom has been in the news for a considerable number of times this past week. Kipp takes a look at the reasons why.
Saudi cuts spending increases
As signs of recovery make themselves apparent in the Saudi economy, Saudi officials have “dramatically” cut back on government spending and stimulus measures. Not only has consumer and corporate spending increased, but bank lending has picked up and oil prices rose by 25 percent during 2010. According to data from the budget report, Saudi Arabia’s GDP grew 3.8 percent with an expansion in the private sector reaching 3.7 percent. Arab News says Saudi’s income for 2010 year’s income was over 50 percent higher with expenditure 16 percent higher than budgeted. Impressive as these stats are in times such as these, the deep pocket of the kingdom’s rulers should be noted. Paul Gamble and Brad Bourland of Jadwa Investment wrote in a research report “Although many countries are being forced to cut back spending to contain budget deficits due to concerns about debt, the kingdom does not face any problems (…) Any deficit can be financed comfortably using SAMA’s [Saudi Arabia Monetary Authority] huge stock of net foreign assets.”
Saudi Real Estate Market
While we here in sunny Dubai have been cribbing about the very gloomy not to mention over supplied real estate market, it would appear our counterparts in Saudi are singing to a very different tune. In fact a recent report in Gulf News indicated that with the exceptionally good year the Saudi economy has enjoyed and the rising oil prices, the real estate market is looking up. A recent report issued by Jones Lang LaSalle (JLLS) found that MNC’s have been leasing out considerable amount of office space; with Siemens taking on 9,000 square meters and GE taking on 1,300 square meters on lease. In part, the demand is being fueled by a very real lack of office space. Stefan Burch, associate at Cluttons, the property consultancy told Gulf News, “Jeddah has traditionally lacked a central business district as well as any international grade A [office] stock. (…) This looks set to be addressed in the short term as new developments come online which will provide about 350,000 square metres of commercial space over the next three years.”
Saudi Arabia container volumes on the rise
Saudi Arabia, which handles around 12,000 ships annually (i.e. more than one ship an hour), reported a significant rise in the container volumes this year. The Saudi Ports Authority said that when compared to October last year, container volumes rose 9.8 percent in October to 13.5 million tons. While imports rose by 9.9 percent to 5.5 million tons, exports increased 9.7 percent to 7.9 million tons.