Monday 25 June 2018

Saudi economy to grow 4pc this year

Jeddah, August 13, 2014

Saudi Arabia’s economy is set to grow four per cent this year as its real GDP growth will remain at 3.8 per cent, said a report.

The Bank of America Merrill Lynch’s Mena Equity Strategy report pointed out that this ‘moderate upside potential’ is premised on the expectation that the impact of the labour market reforms on the non-oil economy will start easing from the second half of the year, said the Saudi Gazette report.

The kingdom’s consumption growth has been among the strongest in the region, it said, with expected growth at 6.6 per cent this year and eight per cent in the next, on the back of a demographic window of opportunity as well as a cyclical re-leveraging and structural developments, it said.

It also said that the SR250 billion ($66.6 billion) housing appropriations and mortgage laws are likely to progress slowly but steadily in the near term.

The negative near-term implications of labour market reforms are mitigated by the fact that the eventual replacement of lower-level expatriate labour by higher-paid Saudi labour should prove supportive for consumption trends, said the report.

The Saudi Arabian unemployment rate stood at 11.5 per cent last year, up from 10 per cent in 2010, though the increase was likely distorted by the introduction of job-seeker registration since then, it said.

Meanwhile, the point of sales data expanded 13.6 per cent year-on-year, decreasing from the 20 per cent year-on-year average level last year. However, it suggests that consumer spending has held up reasonably well against any expatriate worker outflows.

The negative impact of the clampdown on labour, however, is just a phase, it said, noting the dominant role of the government in the Saudi Arabian economy making it well placed to support consumers through a number of price subsidies, public sector employment drives, frequent wage increases, plans to curb inflation and access to a pool of subsidised financing at Specialized Credit Institutions (SCIs).

With increased pressure to provide job opportunities in a market with a high unemployment rate, the labour ministry had been compelled to take measures against illegal expats, of which 1.2-1.5 million had already left by the end of last year.

The report also noted that the Saudi Arabian digital electronics is "under stress,” with the market already well penetrated in terms of consumer electronics per capita ($132 per capita compared to $65 for other EEMEA countries) and less ground-breaking tech innovations over the next 12 months from the key global players which could propel digital electronics LFL sales growth figures again into a bull cycle, comparable to 2011-2013.

Tags: economy | Saudi | grow |

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