Doha: The non-oil private sector is expected to be the key driver of growth in 2014 in Saudi Arabia, boosted by large public sector infrastructure investment and the rapidly growing population.
The government-led nfrastructure projects such as the Riyadh metro and a high speed inter-city rail network currently under construction will boost the spending, the QNB said in a report yesterday.
The ministry of finance in Saudi Arabia in a budget announcement said that overall economic growth slowed to 3.8 percent year-on-year in 2013 owing to a decline in oil output. Meanwhile, non-oil growth grew by a robust five percent year-on-year in 2013 as consecutive years of elevated government spending lifted business and consumer confidence and banks’ comfort in lending.
Oil production accounts for just under half of GDP.
In terms of sectors, the budget announcement indicated that the fastest growing sectors in 2013 were the construction (8.1 percent), the transport and communication (7.2 percent), as well as the retail sector (6.1 percent).
Saudi Arabia has been one of the best performing G20 economies in recent years with real GDP growth averaging 5.9 percent per annum during 2008-13.
Based on a conservative oil price assumption of $80 per barrel, government revenues and expenditures are expected to be $228bn in 2014.
Overall, the near-term macroeconomic outlook for Saudi Arabia is positive with a small recovery in oil production lifting real GDP growth to 4.4 percent in 2014. Leading indicators such as point of sales transactions and the Purchasing Managers Index suggest that the private non-oil sector is continuing to grow strongly, and large projects in transportation infrastructure and the mining sector should help underpin a pick-up in private sector growth this year. Indeed, the latest PMI reading for the month of December (58.7 versus 57.1 in November, whereby a reading above 50 indicates expansion) signalled a sharp rise in activity and new orders of non-oil producing firms, with the pace of expansion at an eight month high.
Going forward, there is a small downside risk of lower global oil demand on slow economic growth.
The Peninsula
