Saudi Arabia's economy looks set for a period of sustained growth, with oil revenues remaining high, non-hydrocarbons exports on the rise and the effects of a massive investment program by the state starting to kick in, Global Arab Network said, citing study from Oxford Business Group. Estimates vary as to the rate at which the Saudi economy will expand this year, with the International Monetary Fund (IMF) projecting GDP will rise by 6.5 percent, while some local experts put the figure at near 7.5 percent, in part driven by higher earnings from oil exports and increased state spending on housing and infrastructure developments. Oil production has increased in recent months, with Saudi Arabia ramping up output to 8.96 million barrels per day (bpd) in May, according to OPEC data, with an average of 6.84 million bpd being exported, up by 1.2 percent on the April total. At this rate, and with the current price of Brent crude on the international market averaging about $112 per barrel, Saudi Arabia is looking at around $234 billion in oil export revenue this year. Much of this windfall is being ploughed back into the economy, with King Abdullah, Custodian of the Two Holy Mosques, announcing a series of new spending programs over the past few months, schemes that will see up to $130 billion invested in large-scale housing, infrastructure and economic support projects. While some of the forecast increase in GDP is being driven by oil revenue and the state's investment program, the government's long-term policy of diversifying the economy is also having a greater impact. Data issued by the Central Department of Statistics in mid-July showed that non-oil exports had jumped by 14 percent in the first quarter of the year, with overseas sales totaling $9.9 billion on the back of growing demand for Saudi plastics and petrochemical products. A potentially greater concern, though one far further down the track for the Saudi economy, is the rising domestic demand for the nation's most important product, oil. Domestic demand for oil is projected to increase from last year's level of around 2.4 million bpd to 5.1 million bpd by 2025, while production is only expected to rise from the 8.4 million bpd of 2010 to 10.7 million by the middle of next decade. This incremental increase in local consumption, outstripping new production, would mean that by 2014 Saudi Arabia would be running a budgetary deficit if it continued to boost state spending by 7 percent or more, Jadwa Investment said. "Preventing this outcome requires tough policy reforms … such as … an aggressive commitment to alternative energy sources, especially solar and nuclear power, and increasing the Kingdom's share of global oil production," the authors of the report said. The government is already moving to implement some of these measures, with plans to diversify sources of energy production, further expand the base of the economy and encourage private sector investment, which in turn should generate new revenue streams and reduce the calls on state funding.
