Economic Research

In-depth reports on key economic issues.

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    Wed, 13 April 2016

    Quarterly Oil Market Update (Q1-2016): Production "freezes" not a big deal

     Lower yearly oil prices are taking their toll on shale oil producers, with Q1 2016 seeing the first year-on-year fall in US production in eight years, but record rises in OPEC and Russian crude production have more than compensated for this drop.  Oil prices have shown some firmness in the run-up to the production ‘freeze’ meeting between a number of oil producing countries next week. In our view, there are significant risks to either an agreement being reached or a lack of implementation even if there is an agreement. In both instances we would expect the gains of the previous month or so to be lost. As such we maintain our full year 2016 Brent forecast at $33 pb with prices increasing to $44 pb in 2017. 

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    Thu, 10 March 2016

    Monetary and Financial Update: Pace of Slowdown in Monetary Aggregates to Moderate in 2016

    Following a rapid slowdown of monetary aggregates towards the end of 2015, we now expect some moderation in the pace of slowdown in the Kingdom in 2016. The current series of sovereign bond issuances should reassure investors of the government’s commitment to maintain a high level of spending on the economy, which will continue to be the growth driver for credit to both consumers and corporations. We expect annual growth in credit to the private sector to slow in 2016.

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    Wed, 02 March 2016

    Saudi Labor Market Update: Unemployment and participation fall

    According to data recently released by the General Authority for Statistics (GAS), the Saudi unemployment rate fell slightly from 11.7 percent in 2014 to 11.5 percent in 2015. This fall was mainly attributed to a decline in Saudi labor force participation rather than higher employment growth, as job creation for Saudis have actually slowed during the year. Looking ahead, we expect the private sector to be the main source of new jobs for Saudis, supported by continued labor market reform. 

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    Wed, 24 February 2016

    Inflation Update (January 2016): New energy prices push inflation to a 5-year high

    The General Authority for Statistics (GAS) has released Consumer Price Index data for January, showing a sharp rise in prices by 4.3 percent year-on-year, accelerating from 2.3 percent during the previous month. The recent reform to energy prices meant that housing and utilities and transport were the main sources of inflation as they accelerated sharply in January, both in year-on-year and monthly terms. Our estimate of core inflation, which excludes food and rent and other housing services, but includes transport, rose to its highest level in three years.

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    Mon, 08 February 2016

    The Saudi Economy in 2016

    The Saudi economy will continue to slow in 2016 as the private sector gradually adjusts to the new norm of fiscal deficits and lower spending announced by the government. As oil prices fall year-on-year in 2016, the fiscal deficit will remain in double digits, but the government will push to gradually diversify its revenue base and consolidate its spending. The most recent rise in domestic energy prices represents a trend towards a broader reform in domestic economic policymaking. We expect Saudi oil production in 2016 to remain unchanged, year-on-year, at 10.2 mbpd. Saudi Arabia’s current strategy of maintaining market share will result in lower levels of oil revenues in the short-term, but will benefit it in a few years’ time. Despite the lower level of spending outlined in the 2016 Saudi budget we expect the government to continue supporting economic activity despite the prevailing subdued oil price environment.

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