JEDDAH: Real GDP growth for the Saudi economy is forecast to rise to 4.4 percent in 2012, the fastest rate of growth since 2005, once lending activity returns to normal and private sector companies take meaningful steps to improve their contributions, Banque Saudi Fransi said in its latest report on Saudi economy. GDP growth will climb to 4.2 percent this year, including the 3.5 percent rise in oil GDP activity which accounts for 27.1 percent of GDP, it added. "Oil sector GDP growth is likely to expand 3.5 percent this year, up from about 2.2 percent in 2010, owing to a rise in production and persistent growth in global demand," Dr. John Sfakianakis, chief economist of the bank said in the report. The Energy Information Administration (EIA) forecasts that world oil consumption will grow 1.45 mbpd in 2011 to 88.02 mbpd, with almost 37 percent of new demand arising in China. This marks a slowdown in consumption growth from 2.02 million bpd in 2010 and yet illustrates an overall positive trend. The EIA anticipates another 1.6 mbpd of consumption growth in 2012. Saudi oil production is likely to grow 3.5 percent this year to 8.48 million barrels per day, according to our forecasts. With oil prices now within striking distance of $100 a barrel, Saudi Arabia is well positioned to reap great advantages, the report said. The Kingdom will record foreign assets of $470.8 billion in 2011, a record level and more than 98 percent of GDP. Manufacturing GDP growth will climb to 5.1 percent this year. Output will get a boost from Ma'aden SR20.6 billion phosphates plant as commercial production starts in Q3 2011. The phosphate mine and beneficiation plant will produce 3 million tons per year of di-ammonium phosphate fertilizer, representing about 10 percent of global demand. Wholesale and retail trade GDP growth should speed up to 4.7 percent this year from 4.4 percent in 2010 as a consequence of better consumer demand. The sector's GDP expanded more than 6 percent in each of 2006, 2007 and 2008, before growth slowed to just 2.5 percent in 2009. Non-oil exports, meanwhile, should maintain growth of around 13.2 percent in 2011, on par with expansion in 2010. Imports have taken longer to recover. In 2010, initial estimates show imports advanced less than 1 percent from 2009. "We anticipate that 2011 import flows will moderately improve as retailers and wholesalers build inventories in order to Gulf countries, although it rests on a solid foundation of a population exceeded 27 million - representing almost 60 percent of the total Gulf population. As a consequence of this, and the population's young age demographic, consumer demand has continual potential to expand." Trade flows out of Saudi Arabia improved markedly in 2010, gaining 23 percent on the year earlier, when export revenues had tumbled almost 40 percent. Strong oil revenues and the rise in non-oil trade mentioned earlier should give export revenues another 6.6 percent boost in 2011, the report said. Moreover, upturn in construction activity in 2011 supports growth of 4.2 percent as more real estate projects reach fruition as builders take steps to bridge the gap between supply and demand, BSF said. Construction activity is principally backed by state infrastructure spending and a deficit in available housing. In its 2010-2014 development plan, the government targets construction of one million housing units, or about 200,000 per year. With the market undersupplied, real estate prices faced upward pressure last year. The transport and communications sector is likely grow 5.9 percent this year, having been the second-fastest-growing private sector last year, at 5.6 percent. Transport projects have, meanwhile, been a top priority for the government, which allocated SR25.2 billion of its 2011 budget to transport and telecommunications investments, up 5 percent from 2010 allocations. The plan includes a strategy to lay down 6,600 kilometers of new roads, build four new airports and rebuild the King Abdulaziz International Airport. Moreover, agriculture GDP is likely to grow 0.7 percent in 2011 according to our estimates, compared with about 0.5 percent last year. The community, social and personal services sector is likewise projected to grow rise to 4.3 percent in 2011 from an estimated 3.8 percent last year, the bank said. However, inflationary pressures continue to stem from domestic triggers, including rent and higher goods and services costs, and elevated global food price inflation. After hitting an 18-month high of 6.1 percent in August, inflation moderated and averaged 5.4 percent in 2010, three percentage points above the year earlier. Annual inflation will average 5.1 percent this year, historically high for a country that experienced average inflation of 0.8 percent between 1990 and 2006. Food inflation - comprising almost a third of the cost of living basket - is likely to hover around 6.9 percent in 2011, the bank report added.
