Jadwa forecast-2012

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Jadwa forecast-2012

  1. 1. The outlook for the Saudi economy in 2012 Presented to the Riyadh Group for British Business January 14, 2012 Paul G Gamble Head of Research1
  2. 2. Global Gl b l economic outlook i tl k 2007 2008 2009 2010 2011 2012 World 5.4 2.8 -0.7 0.7 5.1 4.0 3.6 US 1.9 -0.3 -3.5 3.0 1.8 2.0 Japan 2.4 -1.2 -6.3 4.0 -0.9 1.9 EuroZone 3.0 0.4 -4.3 1.8 1.5 -0.2 UK 2.7 27 -0 1 0.1 -4 9 4.9 1.4 14 1.0 10 0.2 02 China 14.2 9.6 9.2 10.3 9.3 8.6 Emerging Markets 8.9 6.0 2.8 7.3 6.3 5.9 Middle East 6.7 4.6 2.6 4.4 4.0 3.4 Source: IMF, World Economic Outlook, Jadwa2
  3. 3. Why th E Wh the Eurozone matters for Saudi Arabia tt f S di A bi A disorderly break-up of the Eurozone would cause a banking crisis similar, and possibly worse, than the collapse of Lehman. Greater caution by Eurozone banks will discourage them from investing outside o tside the region region. The EU is the world’s largest economy; large auto sector and major consumer of plastics Destination of 8 5 percent of Kingdom’s total exports plastics. 8.5 Kingdom s exports. Direct exposure of companies listed on the stock market is small, but the impact on local sentiment is clear clear. A deep recession in the Eurozone will pull down oil demand and prices.3
  4. 4. Oil prices i 150 140 130 120 110 100 ($ per barrel) 90 80 70 60 50 40 30 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Brent crude WTI4
  5. 5. 5 (thousand barrels per day) d r 10,000 10,500 7,500 8,000 8,500 9,000 9,500 Jan-08 M May-08 Saudi Arabia: il S Sep-08 Jan-09 d ti S di A bi oil production M May-09 S Sep-09 Jan-10 M May-10 S Sep-10 Jan-11 M May-11 S Sep-11
  6. 6. Saudi Arabia: Government b d t S di A bi G t budget 800 700 600 500 (SR billion) 400 300 200 100 0 -100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Budgeted spending Budgeted revenue Balance6
  7. 7. Saudi Arabia: Budgeted S di A bi B d t d government spending t di 175 150 125 100 (SR billion) 75 R 50 25 0 2002 2005 2007 2009 2011 2012 Education & Manpower Health & Social Af f airs Municipal Services Transport & Comms. Comms Water, Water Ag & Inf rastructure7
  8. 8. Saudi Arabia: Budgeted S di A bi B d t d versus actual spending t l di 900 800 700 600 500 (SR billion) 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Actual spending Budgeted spending8
  9. 9. Saudi A bi B d t d S di Arabia: Budgeted versus actual oil price t l il i 120 100 rel) 80 (oil price, $ per barr 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f Budgeted B d t d Actual A t l9
  10. 10. Saudi Arabia: Actual S di A bi A t l government fi t finances 1,200 1,000 800 600 (SR billion) 400 R 200 0 -200 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenue Expenditure Budget balance10
  11. 11. Saudi Arabia: S di A bi SAMA net f i assets t foreign t 550 500 450 ($ billion) 400 $ 350 300 250 Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2008 2009 2010 201111
  12. 12. Saudi Arabia: Government d bt S di A bi G t debt 700 600 500 400 (SR billion) 300 b 200 100 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 201112
  13. 13. Comparative government debt data (Debt to GDP ratio) 250 200 150 percent) 100 (p 50 0 Saudi China UK Germany France US Italy Greece Japan Arabia13
  14. 14. Saudi Arabia: Bank lending to the i t S di A bi B k l di t th private sectort 4 40 3 30 2 20 (percent) (percent) 1 10 0 0 -1 -10 -2 -20 Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2008 2009 2010 2011 Month-on-month Month on month Year-on-year Year on year - RHS14
  15. 15. Saudi Arabia: Commercial b k d S di A bi C i l bank deposits with SAMA it ith 160000 140000 120000 100000 (S million) 80000 SR 60000 40000 20000 0 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 2007 2008 2009 2010 2011 Statutory deposits St t t d it Other d Oth deposits with SAMA it ith15
  16. 16. Saudi Arabia: Indicators of consumer spending S di A bi I di t f di 70,000 10,500 65,000 9,500 60,000 8,500 55,000 n) 7,500 7 500 (SR million) ) (SR million 50,000 6,500 45,000 5,500 , 40,000 4,500 35,000 30,000 3,500 25,000 2,500 Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2008 2009 2010 2011 Cash withdrawals f rom ATMs ithdra als Point of sale transactions - RHS16
  17. 17. Saudi Arabia: Interest rates S di A bi I t t t 6 5 4 3 (percent) 2 1 0 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Repo rate Reverse repo rate Three-month SAIBOR17
  18. 18. Saudi Arabia: Real S di A bi R l GDP growth b sector th by t 10 8 6 4 2 percent) 0 (p -2 -4 -6 -8 2004 2005 2006 2007 2008 2009 2010 2011 2012f Real non-oil growth non oil Real oil growth Real GDP growth18
  19. 19. Saudi Arabia: Real GDP growth by sector (percent) 2008 2009 2010 2011 2012 Agriculture g 0.7 -0.5 1.1 2.8 1.0 Manufacturing 6.0 1.5 5.3 12.4 5.2 Electricity, gas and water 6.7 6.8 7.9 4.2 6.3 Construction 1.5 0.6 7.8 11.6 8.0 Wholesale & retail trade 6.5 2.5 8.1 6.4 4.2 Transport & communication 12.2 7.4 8.0 10.1 7.0 Finance 2.4 2.6 1.6 2.7 3.3 Non-oil private sector 4.6 2.7 5.3 8.3 5.8 Oil 4.3 -8.8 2.2 4.3 -3.8 Government services G t i 2.4 24 5.0 50 5.3 53 6.2 62 6.7 67 Total 4.2 0.1 4.6 6.8 3.319
  20. 20. Saudi Arabia: Inflation S di A bi I fl ti 10 9 8 7 6 (percent) 5 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011f 2012f20
  21. 21. Saudi Arabia: Food i inflation S di A bi F d price i fl ti 18 60 16 50 14 40 12 30 10 20 (percent) (percent) 8 10 6 0 4 -10 2 -20 0 -30 -2 -40 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 2006 2007 2008 2009 2010 2011 Saudi f ood price inf lation Global f ood price inf lation (FAO index; RHS)21
  22. 22. Saudi Arabia: Rental inflation S di A bi R t l i fl ti 20 18 16 14 12 percent) 10 8 (p 6 4 2 0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2007 2008 2009 2010 201122
  23. 23. Saudi Arabia: Inflation b kd S di A bi I fl ti breakdown 14 12 10 8 6 ercent) 4 (pe 2 0 -2 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2009 2010 2011 Education and entertainment Clothing and f ootwear Home f urniture23
  24. 24. Labor L b market k t Regional tensions have made job creation a higher priority. Total Saudi unemployment was 463,000 in 2009 (unemployment rate 10.5 percent). Around 700,000 people have qualified for unemployment benefit. Labor force participation is very low among Saudis, at 36.4 percent; 60.8 percent for males and 12 percent for females. The average labor force participation rate across the world is 77 percent for women it is 41 percent percent, percent. There were 113,496 net new Saudi entrants to the labor force in 2009. Of these, these 40 percent were women women. Expatriates hold 6.2 million jobs in the private sector, 89 percent of the total. There are 13 times more expatriates in the p p private sector than unemployed p y Saudis.24
  25. 25. Labor L b market k t Average monthly wages: Saudis, SR5,868, Expatriates, SR1,549; unemployment benefit SR2,000; minimum public sector salary SR3,000. Education and skills of many nationals has improved, with record numbers studying abroad, but st d ing abroad b t still not aligned with the pri ate sector requirement. ith private req irement Changing the profile of the labor force will entail some costs for the private sector. sector Strong enforcement essential for Nitaqat to be successful. The private sector will remain dominated by expatriates. The government can afford to increase the public sector workforce.25
  26. 26. Saudi Arabia: Domestic energy consumption S di A bi D ti ti 4.0 valent/day) 3.5 3.0 (millio barrels of oil equiv 2.5 2.0 o 1.5 1.0 on 0.5 0.0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 201026
  27. 27. Saudi Arabia: Domestic energy prices S di A bi D ti i Utility prices Gas ($/mbtu) 0.75 Gasoline ($/gallon) 0.48 Electricity ($/kW) 0.013-0.07 3 Water ($/m ) 0.03 Prices paid by domestic consumers for oil ($ per barrel) Saudi Electricity 2.7-4.3 Gasoline retailers 18 Cement companies 4.227
  28. 28. Energy efficiency (barrels of oil equivalent per day to generate $1,000 of GDP) 14 12 10 8 6 4 2 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Saudi Arabia China World Source: Ministry of Petroleum and Minerals28
  29. 29. Saudi Arabia: S di A bi Oil production d ti 12 10 ay) 8 rrels per da 6 (million bar 4 2 ( 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 201029
  30. 30. Saudi Arabia: Outlook for oil consumption and exports (forecasts in shaded area) 8 7 (million barrels pe day) 6 er 5 4 3 n 2 1 0 2002 2006 2010 2014 2018 2022 2026 2030 Exports Domestic consumption30
  31. 31. Saudi Arabia: Projected breakeven oil price (Saudi export crude; forecasts in shaded area) 350 300 250 200 ($ per barrel) 150 b 100 50 0 2002 2006 2010 2014 2018 2022 2026 203031
  32. 32. Conclusion C l i 2012 will be a difficult year for the global economy, with the Eurozone the main area of concern. High government spending will be the main source of economic growth in the Kingdom. This spending is affordable Kingdom affordable. Higher bank lending and low interest rates will support solid non-oil growth. Total growth will be affected by lower oil production production. External pressures will allow inflation to moderate, though some domestically driven domestically-driven price pressures will increase increase. Short-term risks are external; the global economy and the regional political situation. Structural problems with the labor force and rapidly g p p y growing g energy consumption are long-term term concerns.32
  33. 33. Saudi Arabia: Key data d forecasts S di A bi K d t and f t 2004 2005 2006 2007 2008 2009 2010 2011E 2012F 2013FNominal GDP(SR billion) 938.8 1182.5 1335.6 1442.6 1786.1 1412.6 1690.5 2163.1 2065.3 2136.2($ billion) 250.3 315.3 356.2 384.7 476.3 376.7 450.8 576.8 550.7 569.6(% change) 16.7 26.0 12.9 8.0 23.8 -20.9 20.9 19.7 28.0 -4.5 4.5 3.4Real GDP (% change)Oil 6.7 6.2 -0.8 -3.6 4.2 -7.8 2.4 4.3 -3.8 2.8Non-oil private sector 5.3 5.8 6.1 5.5 4.6 2.7 5.3 8.3 5.8 5.5Non-oil government 3.1 4.0 3.1 3.0 3.7 5.2 5.9 6.7 6.2 6.2Total 5.3 5.6 3.2 2.0 4.2 0.1 4.6 6.8 3.3 4.9Oil indicators (average)WTI ($/b) 41.5 56.6 66.0 72.3 99.7 62.0 79.5 94.8 86.0 84.0Saudi ($/b) 34.7 49.5 60.5 68.1 93.4 60.5 77.7 105.0 92.0 86.5Production (million b/d) 8.9 9.4 9.2 8.8 9.2 8.2 8.2 9.3 8.8 9.0Budgetary indicators (SR billion)Government revenue 392 564 674 643 1101 510 742 1110 824 784Government expenditure 285 346 393 466 520 596 645 804 733 770Budget balance 107 218 280 177 581 -87 97 306 91 14(% GDP) 11.4 18.4 21.0 12.2 32.5 -6.1 5.7 14.1 4.4 0.7Domestic debt 614 475 366 267 237 225 167 136 115 100(% GDP) 65.4 40.2 27.4 18.5 13.3 15.9 9.9 6.3 5.6 4.7Monetary indicators (average)Inflation (% change) 0.3 0.7 2.3 4.1 9.9 5.1 5.3 4.9 4.4 4.0SAMA base lending rate (%, end year) 2.50 4.75 5.20 5.50 2.50 2.00 2.00 2.00 2.00 2.00External trade indicators ($ billion)Oil export revenues 110.4 161.6 188.2 205.3 281.0 163.1 214.9 302.4 227.8 200.0Total export revenues 125.7 180.4 210.9 233.1 313.4 192.2 251.0 343.2 271.0 248.5Imports 41.1 53.8 63.0 81.5 100.6 86.4 96.7 98.7 110.5 123.8Trade balance 84.6 126.6 147.8 151.6 212.7 105.8 154.3 244.5 160.5 124.7Current account balance 51.9 90.0 98.9 93.3 132.3 21.0 67.0 159.5 80.6 41.5(% GDP) 20.7 20 7 28.5 28 5 27.8 27 8 24.3 24 3 27.8 27 8 5.6 56 14.9 14 9 27.6 27 6 14.6 14 6 7.3 73Official foreign assets 127.9 195.5 273.4 359.8 502.0 474.2 520.3 634.8 695.3 728.3Social and demographic indicatorsPopulation (million) 22.7 23.4 24.1 24.8 25.5 26.3 27.1 27.9 28.8 29.7Unemployment (male, 15+, %) 11.0 11.5 12.0 11.0 9.8 10.5 10.2 11.0 10.5 9.4GDP per capita ($) 11039 13503 14806 15523 18651 14311 16612 20651 19122 1919033

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