dr. john sfakianakis group general manager, chief economist al khobar may 29, 2010
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Dr. John Sfakianakis Group General Manager, Chief Economist Al Khobar May 29, 2010. Where is the global economy going now?. V. If you think Greece is the only one having a debt problem in Europe, think again. Macroeconomically Saudi Arabia is very healthy and solid. - PowerPoint PPT PresentationTRANSCRIPT
Dr. John SfakianakisGroup General Manager, Chief EconomistAl KhobarMay 29, 2010
Where is the global economy going now?
V
ϱ
If you think Greece is the only one having a debt problem in Europe, think again
Macroeconomically Saudi Arabia is very healthy and solid
2009 Estimated Gross External Debt (%of GDP)180.5%
67.7%
38.0%23.5% 19.6% 17.1%
Bahrain Qatar UAE Kuwait KSA Oman
Source: IMF
Real estate exposure is the smallest in the region – NPLs are very low at 3.3%
Minimal Exposure to Real Estate
7%16% 18% 20%
32% 33%39%
57%
68%
KSA Turkey Russia Qatar UAE Kuwait Czech US UK
Real Estate & Construction Loans / Total Loans
Government debt is still going down
Saudi public debt continues to fall
0200400600800
2002 2003 2004 2005 2006 2007 2008 2009ACTUAL
2010f
(SR
, bn)
020406080100
%
Outstanding public debt Debt to GDP
Source: Ministry of Finance, SAMA, Banque Saudi Forecasts
Private sector credit growths slowly picks up, YoY could be at 8%
-22610141822
710715720725730735740745750
2009 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
(YoY %
change)(S
R, b
n)
Private sector credit growth slowly picks up
Saudi private sector credit Annual growth rateSource: SAMA
Business confidence in Saudi Arabia is gradually on the rise
BSF Business Confidence Index
99.4
98.2
100
97.0
97.5
98.0
98.5
99.0
99.5
100.0
100.5
101.0
Sep-09 Q4 2009 Q1 2010
The economy is slowly rebounding in 2010
Robust growth of non-oil private sector?
0.01.02.03.04.05.06.07.08.09.0
2002 2003 2004 2005 2006 2007 2008 2009 2010
YoY
% c
hang
e
Real GDP Non-oil private sector real GDP
Source: SAMA, Banque Saudi Fransi forecasts
SAMA repleneshing foreign assets as oil prices gain momentum
30405060708090100110120130140150
500600700800900
10001100120013001400150016001700
2006 2007 2008 2009 2010
(Oil price, U
SD
/bbl)(S
R, b
n)
SAMA replenishing foreign assets as oil prices gain momentum
SAMA net foreign assets Oil price
Source: SAMA
Oil prices are providing good support
Oil prices remain in $70-80 range
30354045505560657075808590
2009 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 Feb Mar
(US
D p
er b
arre
l)
Source: Reuters
Challenge No. 1 Inflation is down in ’010 but historically high
-5-3-113579
1113151719212325
2007 Mar May Jul Sep Nov2008 Mar May Jul Sep Nov2009 Mar May Jul Sep Nov2010
(YoY
% c
hang
e)
Inflation rate Rental inflation Food and beverage inflation
Rental inflation falls to lowest level in more than two years, food costs climb
Source: Central Department of Statistics
Saudi food prices track global trends after lag
9095100105110115120125
9095
100105110115120125130135140145150155160165
2007 2008 2009 2010
(SA
UD
I)
(FA
O)
Saudi food prices track global trends after lag
FAO food price index Saudi food and beverage index
Source: Food and Agriculture Organisation, CDSI
Challenge No. 2: Labour Market, expatriates, remittances etc.
Labour productivity is very low
Challenge No. 3: Energy (oil, electricity and water)
Saudi domestic oil demand rising rapidly
-10
-5
0
5
10
15
20
25
30
Saudi Arabia Asia North America Europe Middle East Latin America
Gro
wth
in o
il de
man
d be
twee
n 20
07-e
nd 2
010
Source: International Energy Agency
Water demand is rising fast: Around 33% of water is wasted via pipeline system
Trends in Saudi water resources
60
70
80
90
100
110
120
130
140
1992 1997 2002 2007 2008
(cub
ic m
etre
s pe
r ye
ar)
10
12
14
16
18
20
22
24
26
(Millions)
Renewable water resources per capita Population
Source: Food and Agriculture Organisation Aquastat
Our renewable water resources are among the lowest
Renewable water resources per capita 2008
0
250
500
750
1000
1250
1500
1750
2000
2250
2500
Alg
eria
Bahr
ain
Egy
pt
Iran
Iraq
Jord
an
Kuw
ait
Leba
non
Liby
a
Qat
ar
Saud
i Ara
bia
Tuni
sia
Uni
ted
Arab
Emira
tes
Yem
en
(cub
ic m
etre
s pe
r pe
rson
, per
yea
r)
Source: Food and Agriculture Organisation Aquastat
Electricity demand is rising fast (7-8% per year)
Electricity demand poised for massive surge
10
15
20
25
30
35
40
45
50
55
60
1998 2004 2005 2006 2007 2008 2022f
(GW
)
Source: Electricity & Cogeneration Regulatory Authority
State is spending more and more
State allocation for water-related spending rises quickly
05
101520253035404550
2004 2005 2006 2007 2008 2009 2010
(SR
, bn)
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
(%)
Water, electricity and infrastructure allocation Ratio to total state budget
Source: Ministry of Finance
More power but are we efficient users? But something has to give in here?
SEC expects surge in power production
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
2009 2012 2015 2018 2020
(Ant
icip
ated
load
s, M
W)
Anticipated loads (MW)
Source: Saudi Electricity Company
Scenario 1: Oil at $102 through 2015 and $131 through 2020)
Aggressive spending
0
500
1000
1500
2000
2500
2005 2006 2007 2008 2009 2010f 2015f 2020f
(SR,
bn)
-200-150-100-50050100150200250300350400450500550600650
(SR, bn)
State revenue State expenditures Surplus/deficitSource: SAMA, Banque Saudi Fransi forecasts
Scenario 2: Oil at $70 through 2015 and $80 through 2020)
Aggressive spending
0
500
1000
1500
2000
2500
2005 2006 2007 2008 2009 2010f 2015f 2020f
(SR,
bn)
-1000-900-800-700-600-500-400-300-200-1000100200300400500600700
(SR, bn)
State revenue State expenditures Surplus/deficitSource: SAMA, Banque Saudi Fransi forecasts
Scenario 3: Oil at $150 through 2015, $200 through 2020)
Aggressive spending
0500
100015002000250030003500
2005 2006 2007 2008 2009 2010f 2015f 2020f
(SR,
bn)
-200020040060080010001200
(SR,
bn)
State revenue State expenditures Surplus/deficitSource: SAMA, Banque Saudi Fransi forecasts
Energy subsidies, high oil revenues, high spending, we can’t have them all
At $70 per barrel between 2010-2020 we are losing SR 3.3 trillion in crude oil revenue
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