Saudi Arabia's real GDP – the monetary value of all the finished goods and services produced within a country's borders in a specific time period which includes all of private and public consumption, government outlays, investments and exports less imports – is projected to swell by nearly 6.9 percent this year to record its highest growth rate in eight years as a result of a surge in its oil production and public spending, the Saudi American Bank Group (SAMBA) said in its monthly economic bulletin. SAMBA said the fiscal surplus would widen this year despite a massive rise in spending by the government, buoyed by high oil prices and production as well as a sharp increase in the country's foreign assets. “We believe that the authorities will spend around a third of the estimated SR459 billion package announced by King Abdullah early this year. At around SR140 billion this is still a sizeable addition to outlays, and should boost overall spending this year by around 23 percent to some 40 percent of GDP,” it said. “The surge in spending this year is by any measure exceptional, and represents the largest annual increase since 2000 (which followed two years of spending contraction). The economy would probably find it difficult to digest a further increase in 2012, and we think spending will contract slightly next year.” The report showed the oil sector has expanded at an exceptional rate so far this year, and its contribution to GDP is likely to grow by over 11 percent in real terms, the highest growth rate since 2003. “The main driver has been crude oil production, which has been ramped up in response to the outage of Libyan crude. Average crude oil production was running at 9.2 million barrels per day in the first nine months of 2011, around 12 percent higher than the corresponding period of 2010,” SAMBA said. “Production appears to have peaked in the summer at around 9.9 million bpd, and most analysts see Saudi output easing back in the remaining months of the year as Libyan crude is ramped up, albeit slowly and haphazardly.” The report expected growth to slow to about 4.1 percent in 2012-2013, as oil production eases and the pace of government spending moderates somewhat. In current prices, Saudi Arabia's economy is forecast to soar by 29.2 percent to $557 billion in 2011 from $431 billion in 2010. The study forecast that GDP will slow to around $544 billion in 2012 before sharply rebounding to nearly $587 billion due to an expected rise in crude prices. Higher oil exports will also allow Saudi Arabia to record a much higher current account surplus at 24.4 percent of GDP in 2011 compared to 15.7 percent in 2010. It also projected the budgeted deficit to turn into a surplus of 13.1 percent of GDP in 2011 against 5.4 percent in 2010 and a deficit in 2009. The study noted that fiscal and current account surpluses boosted Saudi Arabia's net foreign assets from around $435.6 billion at the end of 2009 to $466.6 billion at the end of 2010. It expected them to rocket to $602.6 billion at the end of this year and continue their rise to reach $679.6 billion at the end of 2012 and a record high of nearly $739.8 billion at the end of 2013.
