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Saudi powers ahead
While the world fears another recession, Saudi’s economy continues to grow. It dominates the Gulf economy – as it would any single currency – but it has its problems, too.
November 22, 2010 12:37 by Samuel Potter
Also, according to the National, the $60 billion being paid by Saudi to firms contracted to supply arms and military equipment to the country will not all disappear to private bank accounts. Thanks to the country’s offsetting rules, the contractors who benefit from the deals will be required to help build ventures in other sectors of the Saudi economy, which means more than $20 billion in benefits could be felt in the kingdom.
Saudi is not without problems, however. The country can’t keep pace with a young and growing population: there aren’t enough jobs, let alone houses for everyone. And when broken down, the GDP figures for the first half of the year show that private sector growth (outside of oil) is significantly lower than the overall figure, at 6.5 percent. But that’s still mighty impressive from a global perspective, and with such rapid economic growth and seemingly savvy business sense, the country must surely overcome its housing and employment limitations. The trouble is, these issues are now compounded by a poorly king and doubts over succession in the country. [See below for more issues facing the Saudi economy.]
Saudi Arabia’s strength means it is well placed to pursue a currency union with the remaining members of the project, if all parties feel it is in their interest. But does powering-Saudi need to tie up with its weaker neighbours? And could Bahrain, Kuwait, and Qatar stomach a currency union in which they would, to all intents and purposes, simply be absorbed into the Saudi economic machine?
Whether the UAE is better or worse off outside of such a project is uncertain; what is sure is that the Emirates can now only watch jealously as Saudi powers on.
The main economic challenges for Saudi Arabia
Saudi Arabia, the world’s biggest oil exporter, is facing challenges as it tries to diversify its economy and integrate its fast-rising young population. Because it is an absolute monarchy, many of the economic and social policies will depend on who is leading the country. King Abdullah is travelling to the United States on Monday for medical checks, while Crown Prince Sultan is returning from a holiday abroad.
Interior Minister Prince Nayef bin Abdul-Aziz, who is also second deputy prime minister, is considered to be in a strong position to assume leadership of the country in the event of serious health problems afflicting the king and crown prince.
The following pages explore the main challenges to Saudi Arabia’s economy.