JEDDAH: Saudi Arabia is set to see economic growth of seven percent this year, before slowing to 4.4 percent in 2012, QNB Capital said in its latest report. It forecast that high energy prices will mean that nominal GDP for the Kingdom will surpass its previous peak in 2008, reaching $549 billion in 2012. The report also expected that both the current and fiscal accounts will record higher surpluses in 2011-12 than they did in 2010. The current account surplus, which was 17 percent of GDP in 2010, is forecast to post an average surplus of 26 percent of GDP in 2011-12, QNB Capital added. Moreover, the government budget surplus is expected to average 12 percent of GDP, despite major increases in public spending plans, the report added. It also projected that inflation will rise 6.1 percent in 2011 due to rising rental costs and imported inflation from higher global food and commodity prices. House building and slower price growth in international commodities will lead to a deceleration in inflation to 4.4 percent in 2012, the report said. Last month, the International Monetary Fund said economic growth in Saudi Arabia was set to increase to 6.5 percent this year, up from 4.1 percent in 2010. Leading indicators for the first quarter of 2011 showed a strengthening in economic activity due to an increase in oil output and more government spending, the IMF said. Inflation would likely rise to about 6 percent, the IMF said without elaborating. Government data on May 14 showed annual inflation rose to 4.8 percent in April due to higher food and transport costs. Fitch Ratings said last month that it expected Saudi Arabia's economy to grow by 5.8 percent this year, driven in part by a healthy banking sector. Ratings agencies had earlier assigned a stable outlook on the Kingdom's banks.
