JEDDAH – Saudi economy is expected to expand at a median rate of 5.2 percent this year, instead of the 4.5 percent forecast in the March poll, a Reuters poll of analysts showed. Last year, the Saudi economy grew 6.8 percent. However, the Kingdom's outlook for next year was cut to 4.0 percent from 4.3 percent, Saudi Arabia is expected to book a surplus of 13.2 percent of GDP in 2012, up from 12.4 percent predicted in March's poll. "We expect Saudi oil production to increase a little bit this year and we think the government spending will be trimmed a little bit by around 5 percent, but that really reflects last year's outsized spending," said James Reeve, senior economist at Samba Financial Group in London. "In the short term, they can easily cope with significantly lower oil prices as they did in 2009. But they need to get a handle on domestic oil consumption in the medium- to long term." Growth forecast for the UAE was lowered to 3.4 percent from 3.6 percent. Nevertheless, most countries are expected to enjoy large fiscal surpluses this year and next, the poll showed. In the United Arab Emirates, GDP growth is now forecast to slow to 3.2 percent this year from 4.2 percent in 2011. The latest forecast is slightly more optimistic than 3.1 percent predicted in the March poll. The UAE's surplus is seen to remain unchanged at 5.9 percent. Qatar remained the top projected 2012 performer with a 6.3 percent growth forecast, although that was down from the March poll's prediction of 6.6 percent. "Downside risks exist from Europe and the world economy. But this aside, growth in the GCC should hold up reasonably well," said Daniel Kaye, senior economist at National Bank of Kuwait. "Despite the recent fall in oil prices, fiscal and external balances will remain very solid." Kuwait is projected to post the largest surplus of 22.3 percent of GDP for its fiscal year, which started in April - partly because a political standoff between the Cabinet and opposition members of Parliament is delaying expenditure on big infrastructure projects. Bahrain, which analysts believe needs an oil price averaging about $115 to balance its budget - by far the highest price in the Gulf - is forecast to be the only GCC country in the red in 2012, with a budget deficit of 2.0 percent of GDP. However, that would be a smaller deficit than the 3.7 percent gap forecast by the last poll in March. – SG/Reuters
