Social workers have strongly urged all overstayers to take immediate steps to regularise their status within the stipulated time frame
“From the budget it is clear that the government will maintain spending in a bid to offset weakening private sector confidence and keep key infrastructure projects on track,” Howard Handy, chief economist of Samba Financial Group, said.
The kingdom announced its 2009 budget in late December. The key feature of the budget is the projected deficit which is equivalent to around 5 per cent of gross domestic product (GDP).
Handy said that given that the government holds deposits with the Saudi Arabian Monetary Agency (central bank) worth around SR1.1 trillion, the kingdom is well placed to maintain its expansionary fiscal stance despite the deteriorating outlook for oil prices.”
Saudi Arabia’s crude oil output will be cut back sharply this year, and real growth will likely funnel resources through the banking system in order to keep key infrastructure projects broadly on schedule.
Yet with risk management to the fore, this is unlikely to herald resurgence in commercial bank lending growth on the same levels witnessed in recent years.
Rather, banks are likely to maintain a cautious approach, waiting for global economic prospects to improve and for international banks to renew their interest in Saudi corporate debt before significantly increasing lending.
According to the report, this should begin to happen toward the end of this year, though prospects for the global economy remain fraught with uncertainty.
Private consumption has continued to fall in the kingdom. The nearest proxy — point of sales transactions — showed some improvement in November 2008, but this is unlikely to point to a lasting rebound given the direction of oil prices and the wealth effect of the slumping stock market.
“Saudi Arabia is expected to reduce crude oil output by around 14 per cent this year to an average of just over 7.9 million barrels a day. Ongoing investment, especially in gas, will offer some support, but the crude cutback means that sector is set to contract by around 10 per cent this year. This will have a significant impact on overall GDP which might contract by around 1.5 per cent this year,” Handy said.
Projects either on hold or cancelled amounted to $28 billion in mid-January (MeedProjects), while a number of projects in the early planning stages are being shelved.
Handy said the $28 billion represents only around 4 per cent of the $660 billion of projects in various stages of development, but the trend is clear.
Saudi Arabia’s inflation has started decelerating, reflecting the slowdown in domestic economic growth and weakening global commodities prices.
Social workers have strongly urged all overstayers to take immediate steps to regularise their status within the stipulated time frame
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