Saudi Arabia's economic performance has been exceptional in recent years, according to Saudi Economic Perspectives July 2009 by National Commercial Bank. The report, however, said that the Kingdom's real GDP (gross domestic product) growth is expected to fall by around 1 per cent this year as a contraction in the oil sector is projected to offset moderating growth in the non-oil sector. It added that real GDP growth is forecast to increase by 3 per cent in 2010 based on a recovery in global demand conditions and a higher oil production level. According to the report, between 2003 and 2007 real GDP growth averaged around 5 per cent a year, the strongest growth in a decade, and up strongly from the 2.5 per cent annual average growth during the 1990s. Last year, real GDP growth was estimated to have reached 4.5 percent, largely driven by strong private and public investment expenditure on the back of record oil prices and abundant liquidity. However, the NCB report said the economic growth outlook for 2009 had deteriorated sharply because of the global financial crisis and economic recession. Although Saudi Arabia has been less affected by the financial crisis, the indirect impact on the real economy will be significant. There are three main channels through which the global crisis is spreading to Saudi Arabia: substantially lower oil prices are shrinking the main source of government revenue, (ii) weaker global demand for oil has motivated drastic Opec production cuts and (iii) tighter credit and investor risk aversion in international markets have led to a shortage of foreign capital, a massive decline in local asset prices and lower investment.
