Saudi Arabia Country Risk Report Q2 2016
The replacement of Saudi Arabia's heir in April 2015, along withother major changes in the country's leadership, represent a furtherconsolidation of King Salman's authority. That said, the elevation ofthe king's son as second in line to the throne is proving a controversialchoice, and could spark future instability.
Saudi Arabia's economic growth will slow considerably in 2016 and2017 after six consecutive years of strong expansion. The corporatesector will face a much more challenging macroeconomic environment,amid contractions in public spending, rising energy costs, andtightening liquidity.
Saudi Arabia's austerity budget for 2016 heralds a prolonged periodof economic disruption and increased political headwinds. While thegovernment's economic programme has the potential to significantlyoverhaul the Saudi economy, resistance from the elite and populardiscontent will present substantial roadblocks to reform.
The Saudi-led military operation in Yemen has so far achieved few ofits desired objectives. A move towards political dialogue between thewarring factions is likely, but any agreement between Saudi Arabiaand Yemen's Shi'a Houthi rebels will be difficult to reach and evenmore difficult to implement.
While we maintain that large-scale protests are unlikely to occurin Saudi Arabia, large youth unemployment coupled with a lack ofpolitical liberties mean that tensions will continue to linger.
The municipal polls conducted in Saudi Arabia in December 2015 areof mostly symbolic importance, given the councils' limited authority.
That said, the election of several women marks a positive evolutionin the country's slow and highly managed process of social reform,and we expect women to gain further ground in public life and theprivate arena over the coming years.
- Executive Summary
- Core Views
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- A More Challenging Period
- Saudi Arabia's economic growth will slow considerably in 2016 and 2017 after six consecutive years of strong expansion. The corporate
- sector will face a much more challenging macroeconomic environment, amid contractions in public spending, rising energy costs, and
- tightening liquidity.
- GDP By Expenditure Outlook
- TABLE: COMPONENTS OF GDP (% OF TOTAL)
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Fiscal And Debt Outlook
- 2016 Budget Shifts Onus To Domestic Politics
- Saudi Arabia's austerity budget for 2016 heralds a prolonged period of economic disruption and increased political headwinds. While the
- government's economic programme has the potential to significantly overhaul the Saudi economy, resistance from the elite and popular
- discontent will present substantial roadblocks to reform.
- TABLE: 2016 BUDGET: MAIN PROVISIONS
- Structural Fiscal Position
- TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2014)
- Chapter 2: 10-Year Forecast
- The Saudi Arabian Economy To 2025
- 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. Efforts towards the long-term goal of economic diversification will result in a broader
- export base, but oil will remain a central part of the Saudi economy.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Slow Social Reform Process To Continue
- The municipal polls conducted in Saudi Arabia in December 2015 are of mostly symbolic importance, given the councils' limited
- authority. That said, the election of several women marks a positive evolution in the country's slow and highly managed process of
- social reform, and we expect women to gain further ground in public life and the private arena over the coming years.
- TABLE: POLITICAL OVERVIEW
- Foreign Policy
- Iran-Saudi Arabia Diplomatic Cut To Have Regional Ramifications
- The severing of diplomatic ties between Iran and Saudi Arabia will have enormous implications for conflicts in Yemen and Syria, and
- worsen the sectarian divide across the region. We do not expect a significant economic impact, as trade between the two countries is
- non-existent and any risk premium in oil prices already appears to have faded.
- 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 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- TABLE: OPERATIONAL RISK
- Trade Procedures And Governance
- TABLE: MENA – TRADE PROCEDURES AND GOVERNANCE RISK
- TABLE: REQUIRED TRADE DOCUMENTS
- TABLE: TRADE PROCEDURES AND COSTS
- Vulnerability To Crime
- Chapter 5: BMI Global Macro Outlook
- Global Macro Outlook
- Downside Risks Gather Momentum
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- TABLE: MACROECONOMIC DATA & FORECASTS