The Saudi economy continued its strong growth in the first half of this year, with the nominal GDP surging 24.1 per cent to SR798.5 billion ($212.9 billion) from SR643.3 billion during the same period last year, a report said.

The high growth in the first half is a reflection of the sharp recovery in oil prices and oil production in the country compared to the low base of H1 2009, said the monthly economic report published by Al Rajhi Capital, the investment-banking subsidiary of Al Rajhi Bank.

During H1 2010, the oil sector grew by more than 44 per cent whereas growth in the government sector was 13.5 per cent.
Growth in the private sector was comparatively less robust, rising by 6.5 per cent, while other major sub-sectors such as manufacturing, excluding oil refining, and construction and building grew by 9.2 per cent and 7.9 per cent, respectively, the report said.

Another positive indicator noted by the report was the moderation in inflation in line with Al Rajhi Capital’s expectations.
At the same time, looking across the regional economies, the report noted further signs of improvement. Banks in the UAE emerged in a strong position to implement the proposed Basel 3 reforms and EIBOR eased following the Dubai World debt restructuring plan being accepted, it said.

The report saw the continuation of sluggishness in the real estate sector in the UAE.

In Bahrain, real GDP growth was 4.6 per cent year-on-year in Q2 2010, it said.

Commenting on the report, Dr Saleh Alsuhaibani, head of research at Al Rajhi Capital, said: “We continue to be encouraged by the strong performance of the Saudi economy, where growth has been supported by an increase in oil prices as well as the expansion of the energy sector and other key areas of the economy. These positive developments have further been mirrored across much of the GCC where the regional economies continue to exhibit positive signs of growth and recovery.”

He continued: “At the same time, however, our report highlights a number of less positive trends on a global basis including clear evidence of slowing economic activity in the US, where deceleration has resulted in the requirement for another round of quantitative easing by the US Fed. The positive impact of this easing is already visible as depreciated dollar. This has boosted sentiment to some extent and has supported the equity market despite economic data not being inherently encouraging. Al Rajhi Capital will continue to monitor these trends and their impact on the Saudi, regional and global markets.”  - TradeArabia News Service