RIYADH - The Saudi economy is forecast to shrink by 1.2 percent in 2009, despite a stronger market for oil and expanded government investment, Riyadh-based Samba Bank said on Monday.
The recovery of oil prices to above $60 a barrel and a forecast 24-percent hike in government spending is not enough to offset a sharp slowdown in private sector activity, the bank said in its mid-year report on the economy of the world’s leading oil exporter.
“Public sector investment has been vigorous in both the oil and non-oil sectors; private investment, in contrast, remains weak, hemmed in by extremely tight credit conditions and poor export prospects,” Samba said.
It forecast GDP would contract by 1.2 percent after 4.5 percent growth last year. Growth would resume in 2010 hitting 4.4 percent, the bank predicted.
It pointed to a continuing weakness in markets for petrochemicals and refined products, the country’s leading exports after oil and natural gas, with prices for polyethylene still at half the highs of mid-2008, for example.
Meanwhile, the Saudi Tadawul market closed 1.15 percent higher at 5,553.08 points. Although market bellwether and petrochemical giant SABIC lost 0.79 percent (closing at SR62.75), the TASI gained momentum triggered by strong bank and insurance shares. Alinma Bank recovered and advanced by 0.38 percent to SR13.15. Weqaya Takaful (5.11 percent higher at 28.80) gained for the first time since its IPO on June 20 when it soared 228 percent initially but then declined on profit bookings. Trading value ended at SR5,065,539,789.05 with 103 stocks advancing and 15 securities declining. - AFP