| Kippreport.com

Saudi will prevail!

December 23, 2009 10:35 by kippreport

Elsewhere in the world the argument rages whether the recession is over or not. In Saudi Arabia, that is not the issue even though the recession has had significant effect on the economy. It has brought down the price of oil with obvious consequences for government income while Saudi investments abroad, both private and public, have tumbled in value.

The effect there has been a sharp intake of breath by investors, creating a distinct lack of local market confidence. That has been noticeable during the past year in a slowdown in private sector projects.

It is a very different case with the government. It certainly has confidence. That is apparent in the 2010 budget the government recently unveiled. It is, without doubt, a bullish budget – the largest in Saudi history, with spending at SR540 billion ($144 billion), up 14 percent on the 2009 figure. It is not simply a budget to stimulate the economy, as some observers have suggested. It has to be seen in far bolder, more aggressive terms.

It virtually ignores the recession and pushes on with the aim of growth, regardless of what is happening elsewhere. As an indicator of the government’s continued determination to turn the country into a high-skilled economy, spending on education (the second largest sector after defense) continues to account for a quarter of all state spending and is up 13 percent on last year’s figures, in line with the general rise in spending. It now stands at a staggering SR138 billion ($36.8 billion).

Next year, the government budgeted a deficit of SR70 billion ($18.7 billion) for 2010; it will be the nation’s second deficit in as many years. It proves that in spite of financial crisis and its effects on the economy, the government is determined to develop the nation.

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Tags: 2010, Arab News, budget, deficit, oil price, Saudi Arabia