Strong oil prices have led to a massive increase in Saudi gross domestic product (GDP) per capita income but growing inflation threatens the progress, a report said.
The International Monetary Fund (IMF) predicted that per capita income would rise by 27.6% in 2011 to SR81,200 ($21,651) compared to SR63,600 ($16,958) in 2010.
According to economic expert Fahad Jumaa, Saudi population will reach 19.8 million based on the kingdom’s annual population growth of 2.21% while per capita income will hit SR 116,900 ($31,170) on the current prices and SR 48,800 ($13,012) based on fixed prices.
He expressed his concern over growing inflation and termed it as a major threat to Saudi incomes in the current year.
Jumaa said inflation has direct effect on per capita income as shown in the difference between the nominal and real values of per capita income.
Muhammed Al Salim, another economic analyst, said any gain in Saudi income has been enormously affected by inflation in the last few years, which coincides with the loss of savings and investments by Saudi citizens.
He disclosed that as per economic indicators, the real income of Saudis has not changed since the 1980’s. “This is a matter that necessitates adoption of solutions through continued government support to subsidise basic commodities, such as food, and create cooperative societies for provision of low-priced items to low-income categories as is the case in some GCC states,” the Saudi analyst said.
According to a report released by National Commercial Bank, the GDP per capita swelled to an all time high of SR76,296 ($20,344) last year, almost 25% above the 2010 level of about SR60,920 ($16,244).
The report said Saudi population stands at around 28.4 million at the end of 2011 compared with 27.6 million at the end of 2010, more than half the combined population of the Gulf Cooperation Council which groups Saudi Arabia with the UAE and four other Gulf nations.
Analysts believe the surge in per capita income comes as a result of a rise in oil export revenues to an all time high of around SR1,135bn ($302.8 billion) in 2011 following a 50% increase in crude prices and 1 million barrels per day rise in the country’s output.
NCB report said Saudi sits atop more than a fifth of the world’s recoverable crude deposits and relies heavily on oil sales and higher crude prices. Riyadh boosted its nominal GDP to a record SR2163bn ($577 billion) last year, which led to an increase of around 29% in 2010 GDP of nearly SR 1,788bn ($447 billion).
Despite the surge, Saudi Arabia’s per capita remains far below that that of the UAE and Qatar where it exceeded $40,000 and $70,000 respectively last year. This is because of their surging economies and relatively small populations, estimated at eight million and 1.9 million respectively.
Many economic forecasts suggest Saudi per capita will register a slight drop this year and hover around $20,250. Projections say the population is set to rise by around 2.8% to 29.2 million at the end of 2012.