Saudi Q1 project spending doubles to $10.8bn
Riyadh, May 19, 2009
Saudi Arabia said on Tuesday it had more than doubled its capital spending on development projects in the first quarter, awarding contracts worth SR40.6 billion ($10.83 billion) to spur the non-oil sector.
The world's top oil exporter said late last year it would invest $400 billion in the coming five years mainly to build infrastructure in the country of 26 million people.
The government of the largest Arab economy faces a budget deficit this year as it seeks to shore up its domestic economy which some economists say could contract this year due to the global recession.
'The value of projects approved by the Ministry of Finance in the first quarter was SR40.6 billion compared with around SR20 billion in the first quarter of 2008,' Finance minister Ibrahim al-Assaf said in a speech at a Euromoney conference in the Saudi capital, Riyadh.
He later clarified that he was referring to contracts awarded in the three-month period, but did not specify how much of the total went to private companies.
'The current expansion of investment expenditure which covers infrastructure, public services, education and health sectors will provide great trade and investment opportunities for the private sector,' Assaf said.
Saudi Arabia derives almost 88 per cent of state revenues from exports of crude and has tried to reduce its reliance on volatile oil prices, which swung as high as $147 a barrel in 2008 before slumping to the mid-$30 range earlier this year.
"Our economy is still exposed to the vagaries of the oil market so that our growth is much more volatile than in the advanced economies, which are highly diversified," said Muhammad Al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA).
"The government is projecting a budget deficit as a cushion against any slowdown in the private sector," he said in a speech.
The kingdom amassed enormous surpluses during a six-year rally in oil prices. Sama, its central bank, holds foreign assets of SR1.54 trillion ($410.7 billion).
It is now dipping into some reserves to support the economy, Jasser said earlier this week. "Saudi Arabia is unlocking its spending and counter-fiscal spending is taking off," said John Sfakianakis, chief economist at Riyadh-based SABB bank.
The International Monetary Fund said this month it expected the Saudi economy to contract this year as the Opec producer slashes output and experiences slower growth in non-oil sectors.
Assaf declined to comment on whether the economy would grow or contract this year after expanding 4.2 percent last year.
"I would like to state that we are optimistic concerning the future of the Saudi economy. All indicators support this optimism," he said.-Reuters