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Saudi Arabia Country Risk Report Q2 2015

Saudi Arabia Country Risk Report Q2 2015

Core Views

Salman bin Abdulaziz has become Saudi Arabia's new ruler, followingthe death of King Abdullah in January 2015. While the rapid nominationsof a new heir and deputy crown prince resolve the question ofsuccession for now, the risk of divisions between members of theroyal family remains prominent. We expect policy continuity, but seeYemen as a potential flare point.

A wide-ranging cabinet reshuffle by King Salman has consolidatedhis authority at the expense of the sons of the previous ruler. Salmanwill pursue Abdullah's economic and fiscal policies for the timebeing, but social reform will be limited.

In spite of the slump in oil prices, we have marginally raised ouroutlook for Saudi Arabia's economy on the back of the government'sdetermination to keep fiscal policy on an expansionary footing. Wenow forecast real GDP growth of 3.7% in 2015 (using 1999 as abase year), driven by strong consumption and investment.

Developments in Egypt, Syria and Iran have disrupted relationsbetween Saudi Arabia and its traditional ally, the United States. Althoughwe expect the alliance to remain firm over the coming years,we note that Riyadh's foreign policy risks have increased, with theprospect of a US-Iran détente presenting a particular quandary toSaudi policymakers.

Continued heavy spending by the government indicates its ongoingconcerns about the need to shore up its key bases of support,given the persistent threat of public unrest. While we maintain thatlarge-scale protests are unlikely to occur in Saudi Arabia, large youthunemployment coupled with a lack of political liberties mean thattensions will continue to linger.


Executive Summary
Core Views
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics I
Saudi Arabian Succession: Initial Thoughts
Salman bin Abdulaziz has become Saudi Arabia's new ruler, following the death of King Abdullah on January 23. While the rapid
nominations of a new heir and deputy crown prince resolve the question of succession for now, the risk of divisions between members
of the royal family remains prominent. We expect policy continuity, but see Yemen as a potential flare point.
Tab le: POLITICAL OVERVIEW
Domestic Politics II
Implications Of King Salman's Cabinet Reshuffle
King Salman's wide-ranging cabinet reshuffle consolidates his authority at the expense of the sons of the previous ruler, King Abdullah.
The move supports our view that Salman will pursue Abdullah's economic and fiscal policies for the time being. Social reforms will be
limited, and we highlight the risk that divisions within the Al Saud family will steadily build up over the coming years, undermining internal
stability.
Long-Term Political Outlook
Scenarios For The Coming Decade
The Saudi royal family depends on steady oil revenues to maintain its tight grip on the population. As a result, a sustained downturn in
global oil demand could lead to substantial unrest and, potentially, regime change over the long term.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity I
Fiscal Stimulus Will Support Growth
Despite the slump in oil prices, we have marginally raised our outlook for Saudi Arabia's economy on the back of the government's
determination to keep fiscal policy on an expansionary footing.
Tab le: Eco nomic Activity
Table: BMI CRUDE OIL PRICE FORECAST
Economic Activity II
Lower Growth After Rebasing
A change in the base year (from 1999 to 2010) used by Saudi Arabia's statistical authorities will make future headline real GDP growth
rates both lower and more volatile.
Regional Banking Sector Outlook
Lower Oil Prices: Assessing The Impact On MENA Banking Sectors
Lower oil prices will have a mixed impact on MEN A's banking sector over the coming quarters. We believe GCC banks are
fundamentally stable as governments continue with infrastructure programmes; however, there will be a slight decline in liquidity due to
a slowdown in deposits.
Chapter 3: 10-Year Forecast
The Saudi Arabian Economy To 2024
Politics Main Risk To Long-Term Outlook
Assuming the survival of the current form of government into the medium term, we expect moderate growth over our forecast period,
driven by high investment and private consumption.
Table: Long-Term Macroeconomic Forecasts
saudi arabia Q2 2015
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
Tab le: Operatio nal Risk
Tab le: MEN A - Avai labi lity of Labour Risk
Tab le: Top Ten Sourc es of Immigra nts by Cou ntry
Crime Risk
Tab le: Saudi Arabia - Employ ment By Sector
Tab le: MEN A - Cri me Risks
Chapter 5: Key Sectors
Automotives
tab le: Autos Tota l Mark et - Historica l Data And For ecasts
Food & Drink
Tab le: Food Consu mptio n Indicators - Historica l Data & For ecasts
Tab le: Soft Dri nks Sales, Productio n & Trad e
Tab le: Mass Groc ery Retai l Sales By For mat - Historica l Data & For ecasts
Other Key Sectors
tab le: Oil and Gas Sector Key Indicators
Tab le: Phar ma Sector Key Indicators
Tab le: Infrastructur e Sector Key Indicators
Tab le: Teleco ms Sector Key Indicators
Tab le: Defence and Security Sector Key Indicators
Tab le: Freight Key Indicators
Chapter 6: BMI Global Assumptions
Global Outlook
Weaker EMs To Weigh On Growth
Table: Global Assumptions
Tab le: Develop ed Stat es, Real GDP Growt H, %
Tab le: BMI VERSUS BLOOMBERG CONSEN SUS REAL GDP GROWTH FORECASTS, %
Tab le: Emergi ng Mark ets , Real GDP Growth , %

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