Saudi posts strong GDP growth thanks to high oil prices, Libya crisis

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Riyadh's night time skyline. Photo - Ayman Al Jammaz

Saudi American Bank Group (SAMBA) projected a rise of 6.9 percent this year in Saudi Arabias GDP, recording its highest growth rate in eight years.

SAMBA predicted a rise in fiscal surplus despite a surge in public spending by a third announced by King Abdullah in 2011,recording its highest increase since 2000.

The Gulf Kingdom is set for the strongest rate of economic growth since 2003, driven by double digit growth in crude oil and sizeable gains in government spending, the bank said in its report. The amount of crude oil production has risen by almost 12 percent since 2010 with an average of 9.2 million barrels per day.

Outage of Libyan crude resulted in massive production of crude oil, reaching a peak of around 9.9 million bpd in summers. Although, analysts believe that production would ease back in coming months as Libyan crude is ramped up.

Saudi Arabias economy is expected to rise to $557 billion this year from last years $431 billion with an increase of 29.2 per cent. Analysts say easing oil production and pace of government spending would slowdown growth to about 4.1 percent in 2012-2013.

After rebounding to nearly $587 billion, the GDP is forecasted to plunge to $544 billion next year due to expected rise in crude prices.

As a result of higher oil prices, Saudi Arabia would also record a much higher current account surplus at 24.4 percent of GDP for 2011 in comparison to last years 15.7 percent. The budgeted deficit is also projected to turn into surplus of 13.1 percent of GDP.

SAMBAs prediction for fiscal and current account surpluses are expected to boost up Saudi Arabias net foreign assets from $435.6 billion in 2009 to a record high of $739.8 billion by 2013.

Sources: Zawya

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