As the Saudi stock market,the Tadawul All-Share Index or TASI, reaches its highest point since May of 2010, analysts are optimistic about the Kingdom’s overall economic prospects in 2011. After all, Saudi Arabia’s economy escaped much of the destabilizing financial turmoil that gripped many economies, especially in the West, since the global economic downturn of 2008. While not without its own domestic and regional challenges ahead in 2011, Saudi Arabia is positioned for strong economic performance in 2001.
One of the question marks for the Saudi economy is always the price of crude oil. Petroleum export revenues are the reason the Saudi government has the ability to invest heavily in their infrastructure growth. Oil prices rebounded in 2010, as economist John Sfakianakis of BSF discussed in his recent comprehensive analysis of the Saudi budget, “The latest jump in demand led world stocks to decline by 1.5 mbpd in Q3 and an anticipated 0.6 mbpd in Q4, supporting recent price increases. Credit Agricole CIB expects WTI prices to surpass $80 a barrel in Q4 and Q1 2011, although efforts by OPEC to increase production should prompt oil prices to return to the $70-$80 per barrel range in 2011.” The price of oil in 2011 will have a similar effect on Saudi revenues for the fiscal year but its effects on economic growth in the short term is unlikely to be substantial. Continued significant investment in major infrastructure projects is expected.
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