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.
Oil market dynamics and Saudi fiscal challenges
Macroeconomic reportThe recent OPECs decision not to cut output adds further uncertainty not only on the global oil market, but also on the outlook for the Kingdoms fiscal policy. In this report we examine the global environment that led to such decision. We note that while such decision along with other variables in the market would result in different price levels over the next two years, prices of $85 and 83 per barrel for 2015 and 2016, respectively, are most likely. These lower prices will have a direct impact on the balance of payments and fiscal position of the Kingdom. In this report, we examine a number of fiscal policy reactions to different budgetary outcomes and implication of each on the non-oil economy.
Quarterly Oil Market Update (Q3 2014)
Oil market reportIn Q3 2014 oil prices dropped by 7.3 percent to an average of $102 per barrel. We believe this was due to a combination of accelerating US supply, weaker than expected global demand, stabilization in geopolitics, and an appreciation of the dollar. Oil prices will recover slightly in Q4 2014 but ample supply from non-OPEC sources will prevent prices from rising too far beyond $100 per barrel, unless there is a significant deterioration in geopolitics in Iraq, Libya or Russia/Ukraine. We expect Saudi production to 9.5 mbpd in Q4 2014, resulting in 9.7 mbpd average for 2014. In 2015, as the global economy recovers and oil demand picks up, we see Saudi production averaging 9.6 mbpd.
Quarterly GDP update: Oil sector dragged down overall growth in Q2
Oil market reportLatest economic growth data released by CDSI show a real economic growth of 3.8 percent year-on-year, 1.3 percentage point lower than in the first quarter of this year. Contribution to growth has changed compared to the previous quarter and has become more dependent on the non-oil sector. We assume that year-on-year economic growth will be lower in the second half of the year, owing to a decline in oil sector output, while the non-oil private sector will remain robust.
