Economic updates
Our in-depth, independent reports cover the macroeconomic environment, the Saudi government’s annual budget, and Saudi Arabia’s monetary and financial developments, labor market, and inflation.
The Saudi Economy in 2018
Macroeconomic reportWe expect an improvement in the Saudi economy in the year ahead, supported by both the oil and non-oil sector. Oil sector GDP is expected to improve, in part, due to rises in oil production as OPEC and non-OPEC countries gradually exit from cuts at some point during the year. Growth in the non-oil sector is forecasted to improve as an expansionary budget, with a specific set of stimulus packages, lifts activity.
2018 Saudi Fiscal Budget
Budget reportThe government continues to support the economy through the largest ever budgeted expenditure of SR978 billion in 2018, compared with 2017s budget of SR890 billion. Based on revenues of SR783 billion, the government is budgeting for a slightly lower year-on-year deficit at SR195 billion, compared to our forecast of SR220 billion.
Monetary and Financial Update
In June 2017, a rise in interest rates by the US Fed saw the Saudi Arabian Monetary Authority (SAMA) mirroring this rise by increasing its reverse repo policy rate (RRR) by 25 basis points (bps) to 1.25 percent. SAMAs key policy repo rate, however, was unchanged at 2 percent. We see this as part of SAMAs continuous measures to ensure suitable levels of liquidity in the domestic financial system, especially so in the context of slower economic growth and rising funding costs for various reasons.
Shale Oil 2.0
Oil market reportThe recently observed uptick in oil prices has given many US shale oil producers the opportunity to expand production. Latest forecasts from the Energy Information Administration (EIA) see US oil production rising by 10 percent year-on-year in 2017, and 3.3 percent in 2018. Nevertheless, shale oil exploration and production (E&P) companies face a number of potential ‘bumps in road that could hinder their progress and recovery in the near-to-medium term. Besides higher borrowing costs, shale oil producers also face the possibility of constrained capacity leading to inflated operating costs. One area where costs are likely to rise is related to oilfield services, which includes the cost of rigs, equipment and personnel.
