Kingdom maintains growth despite global crisis
Oil revenues account for 80 percent of the Kingdom's economy, according to Saudi Aramco CEO.
April 25, 2010 4:29 by Ben Flanagan
The world’s oil consumption is to grow by 1.1 million barrels per day (bpd) to reach 85.2 million bpd in 2010, which should in turn profit the private sector, according to the World Information Administration, which has forecast the oil consumption growth rate.
One of the countries maintaining progress in its economic growth despite the unprecedented global financial and economic turmoil, is Saudi Arabia. However, one long-term risk Saudi Arabia’s economic growth faces is its overdependence on oil, especially as its real GDP is dependent on fluctuation of oil prices. Oil revenues account for 80 percent of the Kingdom’s economy, according to a statement by Khalid Al-Falih, CEO and president of Saudi Aramco at the 11th annual MIT meeting on Friday. Therefore, diversification and private investment are essential to avoid any negative spillovers into other sectors.
Saudi Arabia needs to have more foreign private investments across a variety of sectors if it has to move its economy away from over-dependence on hydrocarbons as quickly as possible, said Richard Banks, director, Euromoney Saudi Arabia Conference 2010. The conference is being held at Al-Faisaliah Hotel in Riyadh on May 18-19 in partnership with the Ministry of Finance for the fifth year in a row. Minister of Finance Ibrahim Al-Assaf will deliver the keynote address. More than 1,200 key figures from government, finance and business will take part in the conference that will try to find solutions for various issues.
The conference has assumed importance against the background of rapidly changing economic relationships, capital flow direction and the emergence of multi-polar financial power. It will explore and explain the new financial landscape and the place, which Saudi Arabia is taking on the global stage.
The in-house editorial team of Euromoney, a major world organizer of conferences for capital markets and cross-border investment that produces over 50 international events each year, will create an agenda giving an independent and expert analysis at the conference. The team will moderate the panel sessions, presenting an understanding of the global and Saudi macroeconomic climate. There will be sessions on specific areas of active market opportunity and a strategic overview of the key sectors in the Saudi economy and its global relationships.
One of the questions being asked in financial circles is whether the stage is set for a resumption of higher growth. This is being specifically debated in the context of the fact that even though growth rates fell in the recent past, they remained positive.
Although the oil sector’s output was reduced, it declined less than expected and even allowed a minimal growth in the GDP, Banks said, adding that with the world economy on is way to speedy recovery, the energy demand will be on the rise again, especially from Asia.
The upward trend in demand for energy comes at a time when the world’s leading oil exporting nation is making every effort to attract more foreign direct investment. Having already allowed indirect foreign share ownership via so-called swap agreements in 2008, Saudi Arabia has launched its first exchange traded fund.
Confirming the success of the Kingdom’s efforts to diversify the economy and reduce dependency on oil, a report issued by the Ministry of Economy and Planning states that nonoil exports in January 2010 grew by 21 percent to SR9.58 billion compared to SR7.93 billion in the same period last year. At the same time, Saudi imports have decreased by four percent from SR29.49 billion in January 2009 to SR28.38 billion in January 2010.