Saudi Arabian Monetary Agency (SAMA) Governor Muhammad Al-Jasser cut his expectations for the Kingdom's economic growth this year to 5 percent compared to a previous forecast made of around 6 percent in June, though inflation would fall. “I believe... the inflation rate will start to stabilize and then decline in the future,” the central bank governor said in an interview with the Asharq Al-Awsat daily. Inflation in Saudi Arabia has been floating below 5 percent for most of 2011. In August, annual inflation eased to 4.8 percent, down from a high of 6.1 percent in 2010. Monthly price growth halved to 0.5 percent as a rise in housing and transport cost subsided. The central bank previously said it expects inflationary pressures to continue at a moderate pace in the third-quarter of this year. The International Monetary Fund (IMF) said last week that Saudi Arabia is expected to slow to 3.6 percent in 2012 from 6.5 percent this year. Analysts polled by Reuters in June expected the Saudi economy to grow by 5.7 percent in 2011 and 4.5 percent next year. Saudi Arabia has pledged to spend an estimated $130 billion, or nearly 30 percent of its annual economic output, on new houses, creating jobs, unemployment benefit and other measures. “I believe that we are in a better situation than others,” Al-Jasser was quoted as saying. “We hope that the global economy is not entering in a new downturn of fear and weakness, especially in the big financial institutions in Europe, that have a lot of links in the world.” Al-Jasser said in September the OPEC member was not concerned about US debt and was also not looking into buying euro zone debt. Fears of debt contagion in the euro zone and a slowdown in the United States have been shaking global markets over recent months. Europe's debt crisis has generated as much as 300 billion euros ($408 billion) in credit risk for the region's banks, IMF said. “The situation in Europe with regards to government debt and especially the European banks' exposure to these large debts have put them into a difficult situation, and their ability to service their debt has become difficult,” he noted.
