JEDDAH – Substantial mineral resources in Saudi Arabia are expected to result in robust economic growth from 2012 to 2016, a recent Samba Financial Group report said, forecasting an average of 5 percent growth in the Kingdom over that period, with real nonoil sectors growing at the same rate. Inflation is expected to remain controllable, as domestic demand is handled well via imports. Rent prices will continue to be a source of pressure, although a push to increase the stock of housing could soften this impact over the coming five-year period, with inflation stabilized at 5.5 percent. According to the report, government spending will continue to drive growth in the Saudi economy and hydrocarbon revenues should level off at about $285 billion. Including totals for nonoil, the overall government revenue is expected to remain steady at around $300 billion per year from 2012 to 2016. At around 25 to 40 percent of revenue, salaries remain the main call for government earnings. Most Saudi Arabians consider the public sector to be the first resort for employment. Robust population growth and rapid inflation (more than 5 percent) will drive public spending on salaries higher by about 6.5 percent per year over that four-year period. Services and supplies spending is also expected to rise at that rate, as subsidy spending increases briskly due to rising domestic gasoline consumption. Unemployment benefits spending is also forecasted to increase with more registrants take advantage of the programs. In total, current spending is forecasted to grow about 3.5 percent. Significant room remains in capital spending, despite rising spending and while maintaining a fiscal surplus through to 2016. Government spending will create opportunities for the private business sector, under the guidance of the NDP (or Ninth Development Plan). The NDP, running from 2010 to 2014 and valued at $385 billion, is about 67 percent above the previous development plan and prepared by MEP to frame capital spending. Actual amounts and direction of capital spending may vary with circumstances. In the past MEP, has played only a minor role in economic policies, although now that former governor of SAMA Muhammad Al-Jasser has been appointed minister MEP is expected to step up and move into a key role. Human resources remains the largest single allocation of spending, with the goal of preparing graduates for employment in the private sector. Health is another substantial area of spending, and according to a Samba report, health spending is on the rise due to population growth and increased levels of lifestyle diseases. Utilities and transport are seeing higher allocations in spending, as pressures to provide power and adequate roads continue in Saudi Arabia. Investments are also being directed to undeveloped areas of the Kingdom, including Jazan Economic City and Hail's Prince Abdul-Aziz Bin Mousead Economic City. Diversification has been given broad priority, although exploiting Saudi's massive hydrocarbon reserves makes good economic sense. Refining also provides opportunities along the product line, according to Samba's report. Nonoil exports are expected to increase and help with diversification, reducing the risk of external shocks and enhancing sustainable growth. – SG
