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
At this rate, they won’t need the UAE to rejoin the GCC central bank and single currency project. The Emirates walked away from the initiative after it became clear the bank’s physical establishment would take place in Saudi Arabia. Though Saudi is the biggest of the six Gulf economies, the UAE felt that its more advanced financial industry was better suited to the task. And so, smarting, it withdrew from the project when it was revealed Riyadh would be home to the central bank HQ.
The UAE’s decision and subsequent stubbornness has frustrated the remaining four countries in the project (Oman also withdrew). But the economic might of Saudi, rapidly recovering from the global downturn, suggests the UAE’s non-involvement could end up more of an annoyance than a barrier. Figures this week paint the picture of a Saudi economy making huge leaps and bounds – why would they now need the UAE to forge a unified currency?
The three big stories of the past week show the strength and depth of Saudi’s economy, and hint at its potential. First, Saudi nominal GDP is reported to have leapt by 24.1 percent in the first half of the year. This article puts the sharp growth down to an increase in oil prices, yes, but also growth in other sectors. The growth is all the more pronounced because of poor figures from 2009 – in the first half of that year GDP was $171.5 billion. For the same period in 2010 the figure is $212.9 billion.
Second, Q3 figures have shown that corporate profits for companies in Saudi have jumped a staggering 19.1 percent, according to a Saudi bank study. That’s despite disappointing bank results, says Emirates 24-7. The consolidated net income of 137 of the 145 listed companies increased to $5.62 billion from around $4.7 billion in the same period in 2009. “Overall, given the global economic and oil environment, the results have been generally impressive and, in our opinion, we expect a positive momentum for the remainder of the year,” said National Commercial Bank, who were behind the survey.
Meanwhile foreign assets controlled by the Saudi Arabian Monetary Agency (the central bank) have swelled by more than $4.8 billion in September alone, buoyed by a high oil price. It means that Saudi is earning more than its spending, helping the budget towards a surplus at the end of the year.