Saudi Arabia's economy will grow by more than $95 billion in 2011 as a result of high oil prices, while real GDP will pick up by nearly 5.6 percent, its highest growth in six years, Jadwa Investments said in a study. The study saw higher output and prices to boost Saudi Arabia's crude export earnings to one of their highest levels of nearly $278.4 billion in 2011, sharply higher than the income of $214.9bn in 2010. It said the increase would allow Saudi Arabia to turn an assumed budget deficit of SR40 billion into a surplus of nearly SR127 billion compared with SR109 billion in 2010 and an actual deficit of SR87 billion in 2009, when Saudi crude prices averaged about $60. Moreover, Jadwa said the surplus would be achieved although actual spending could rise by 42.5 percent to SR821 billion, saying that higher crude prices and output would push up the country's actual revenue by nearly 75 percent to SR948 billion. Besides, the public debt, which had soared above the Kingdom's GDP in late 1990s, is expected dip to its lowest level of SR160 billion in 15 years, accounting for nearly eight percent of GDP. The current account balance is also expected to record a much wider surplus of nearly SR130 billion in 2011, almost double the 2010 surplus. The study also projected Saudi Arabia's foreign assets to gain nearly $94 billion to reach around $614 billion at the end of 2011, their highest ever level. Oil prices were mixed Tuesday after the International Energy Agency (IEA) cut its forecast for global energy demand, citing economic weakness. New York's main contract, light sweet crude for delivery in October, rose 67 cents at $88.86 a barrel. Brent North Sea crude for October delivery fell 50 cents to $111.75 a barrel in London afternoon deals. Global demand for oil will be lower than expected this year and next because of the economic slowdown, the IEA said Tuesday. The IEA cut its estimate for this year by 200,000 barrels per day and by twice as much, 400,000 bpd, for 2012. Also citing the poor economic climate, OPEC Monday forecast 2011 demand at 87.99 million barrels per day bpd, down from a previous estimate of 88.14 million barrels per day. The IEA meanwhile noted that an oil price "paradox" is at work despite a revival of Libyan production. "The potential for weaker oil demand is tempering price moves on the upside. Oil prices have been held hostage to almost daily negative economic and financial market reports," the IEA said in its monthly report. But it also warned that "supply woes may yet keep a floor under prices heading into the fourth quarter of 2011 winter demand period." The increase in crude prices will also ally with higher oil output to turn a budgeted fiscal deficit into a surplus despite a sharp rise in actual public expenditure, Jadwa said. From around SR1,630 billion ($435 billion) in 2010, the country's nominal gross domestic product will soar to nearly SR1,988.4 billion ($530.3 billion) in 2011, an increase of about $95.2bn or nearly 21.9 percent. It will be one of the highest nominal GDP growth rates in Saudi Arabia's history as a result of a sharp rise in crude prices, which Jadwa projected at an average $99.3 for Saudi crude against $77.7 a barrel in 2010. Real GDP is forecast to rebound by around 5.6 per cent this year compared with 3.8 percent in 2010 and as low as 0.2 percent in 2009.Growth will be driver by both the oil and non-oil sectors. The study also expected the hydrocarbon sector to jump by 8.9 percent while the non-oil sector will likely expand by 4.2 percent and the government sector by five percent. Saudi Arabia's oil production would also increase to an average 8.8 million barrels per day in 2011 compared with 8.2 million bpd in 2010 in move to boost crude supply to offset the disruption of Libya's oil exports because of the war. Meanwhile, industry sources said Saudi Arabia will supply full contracted volumes of crude oil in October to at least three major Asian term buyers, steady from September. Demand for Middle East crude from buyers in northeast Asia has been robust over the past month as refiners stock up ahead of the northern hemisphere winter, keeping margins at profitable levels.
