Saudi economy cools to 5.9% in Q1: Report

27 Aug 2012

(MENAFN) A recent study conducted by Kuwait Finance House found that the Saudi economy growth cooled to 5.9 percent in the first quarter compared to a year earlier, Saudi Gazette reported.

The research said that Saudi Arabia’s GDP grew by 7.4 percent in the fourth quarter of 20111 compared to a year ago, helped by a moderate growth in the manufacturing sector.

The study, however, said that the quarterly real GDP growth for the Gulf Kingdom is still high, supported by an expansion in the oil sector.

The oil sector contributes is expected to remain strong and will drive the Kingdom’s real GDP growth to six percent this year.

KFH-Research report also found that the Saudi purchasing managers’ index (PMI) fell to 59.7 in June 2012 from 60.4 in May, however, still considered high as it reflects strong domestic demand conditions in the Kingdom’s non-oil sector.

Industrial output also showed resilience, helped by government demand and social housing contracts.

Although new orders sub-index fell 1 percentage point to 69.0 in June, the exports order, and employment sub-indexes increased with almost one third of all companies reporting increased production.

Consumer price index (CPI) eased to 4.9 percent in June y/y from 5.1 percent in May y/y, on lower food and housing prices. Inflation this year is expected to fall to 4.7 percent compared to last year, largely due to falling global food and other commodity prices and a stronger US dollar, to which the Saudi riyal is pegged.

Oil sector contributed 90 of budget revenues, which are now expected to reach an all-time high of USD319.6 billion this year.

The report also warned that the Kingdom still faces some downside risks, including a high unemployment rate, and pressures on the government expenditure, driven by the need to improve infrastructure and increasing social spending.