KSA Economic Overview

• ·    KSA GDP projected to expand by 6.8% in 2011, 3.3% in 2012
• ·    Government plans to pay SAR130bn in expropriation of real estate in Makkah
• ·    Fiscal surplus of SAR439bn expected for 2012
• ·    TASI dropped by 3.1% & Saudi corporate profitability rose by 21.0% in 2011

Saudi GDP expected to accelerate to 6.8% in 2011, 3.3% in 2012

The Kingdom of Saudi Arabia (KSA) is projected to record real GDP growth of 6.8% and nominal GDP growth of 28.8% (SAR2.16tn) in 2011. IMF expects economic expansion of Saudi Arabia to decelerate thereon , posting real GDP growth of 3.3% in 2012 and average at 4.4% till 2016. However, sustained high oil prices could drive the GDP higher than initial estimates.

Oil prices likely to stick to levels seen in 2011

Oil prices averaged around USD108/barrel in 2011 as compared to around USD77/barrel in 2010. Global Research expects average oil price to hover around levels seen in 2011 with slightly higher volumes, assuming that KSA kicks up its oil production to cover for the shortage caused by sanctions on Iran; oil production in the range of 9.5 -9.6 b/d cannot be ruled out for 2012.

Budget surplus very likely to exceed government’s projections

We carried out scenario analysis of the government’s fiscal performance for fiscal year 2012 based on three different situations. Our analysis ranges from the worst to best case, with oil output levels expected to vary from 8.5mn bpd to 9.5mn bpd and Arab Light Oil prices over the range of USD80 to USD100 per barrel in 2012.  Based on our scenarios analysis, Saudi Arabia could most likely report budget surplus of around SAR439bn (USD117bn) in 2011 that could range between SAR294bn in worst case to SAR707bn under best case scenario assumptions. Overall, we foresee figures to be substantially higher than the projections of the MoF.

Corporate profitability – 21% rise in profits led by banks and petrochemicals

Based on our analysis of 140 Saudi market listed companies, corporate profits increased by 21.0% reaching SAR94.4bn in 2011. Overall, the profitability results showed rising trend in continuation from 2010 which itself came after first time in last three years. We observed that 52 companies or 37% of the companies, recorded bottom decline. The Petrochemical Industries sector recorded an increase of 38.0% and Banks & Financial Services showed growth of 16.5%.