Saudi Arabia

Politics:

• Analysis

  Saudi Arabia politics: Quick View - Dissident cleric is released from priso

  Event

  King Abdullah bin Abdel-Aziz al-Saud has issued a royal pardon for a jailed popular Islamist cleric, Sheikh Youssef al-Ahmed.

  Analysis

  Sheikh Ahmed was first arrested in July 2011 for sedition after he publicly criticised the king and the then interior minister, Prince Nayef bin Abdel-Aziz al-Saud, for the arrest of a number of influential Islamist figures, and urged Arab intervention against the Syrian regime. The sheikh's sermon was made available on YouTube, and the rapid reaction of the security apparatus may well have been intended to send a strong signal that such dissent would not be tolerated. In April 2012 he was given a five-year jail sentence.

  However, ever since the emergence of a Sunni Islamist reformist trend (known locally as the "Sahwa") in the 1990s, the Saudi government has tried to work with those of a radical Salafi hue who are not necessarily seeking the overthrow of the regime. Since their release from prison several veterans of that movement have become useful allies of the government, including another popular cleric, Salman al-Awdeh, who recently spoke out against Saudis fighting in Syria.

  However, the onset of the Arab Spring has seen greater criticism of aspects of Saudi government policy by a new wave of radical Saudi Salafi clerics, some of whom are distant from the regime and strongly critical of those that have previously reached a political accommodation. In addition, the wave of unrest in the region has also emboldened more liberal-oriented critics of the regime, whose jailed leaders have little prospect of release any time soon.

  For his part Sheikh Ahmed may well adopt a more cautious perspective when addressing domestic political issues in the future. However, his release, which stands out because a number of those with whom he is aligned remain behind bars, emphasises the difficult situation confronting the Saudi leadership: it is increasingly being assailed by both liberals on the one hand and hardline Salafis on the other, and must also cope with a continuous stream of criticisms from bloggers.

  November 19, 2012

• Background

  Saudi Arabia: Political forces at a glance

  Political outlook: Political forces at a glance

  Present government. Executive and legislative power is vested in the king, also called the Custodian of the Two Holy Mosques. The king must be a direct male descendant of Abdel-Aziz al-Saud, the founder of modern Saudi Arabia. Abdullah bin Abdel-Aziz al-Saud came to power in August 2005 on the death of his half-brother, King Fahd. The king makes key decisions in co-ordination with a small coterie of advisers, including senior princes. Weekly meetings of the cabinet, which the king chairs as prime minister, and the Consultative Council, an appointed advisory body, provide additional, but usually not decisive, input.

  Government factions: The overarching priority for the king will remain the maintenance of a broad consensus among the senior Al Saud princes. There are no formal factions, but senior princes have their own networks of supporters and allies. Some hold key cabinet posts and other influential public offices, including as provincial governors, and in the areas of security and defence. Many princes are also active in major businesses and non-governmental organisations, and the Saudi media is largely owned by them. Senior Al Saud princes often give key positions within their own ministries to their sons. The king has to consider the residual strength of the remaining "Al Sudairi brothers", the sons of King Abdel-Aziz al-Saud's favourite wife, Hassa al-Sudairi. Genuine political parties are almost certain to remain illegal.

  Extra-parliamentary forces: The king needs to consider the opinion of the conservative ulema, or Sunni Islamic clergy, who have a centuries-old alliance with the Al Saud, supporting royal political projects in return for consultation, status, salaries and privileges, and a strong influence in areas such as justice and education. A younger generation of "unofficial" clerics and Islamic intellectuals, some inspired by the Muslim Brotherhood, can be more critical of the Al Saud. The king has backed some socially liberalising reforms, which risks creating a conservative backlash within the clerical establishment. However, he has been equally careful during the recent regional unrest to appease the clergy, notably by handing out huge sums for the renovation of mosques and to expand the religious police. The threat of dissent will lead the authorities to police mosques tightly. The authorities will continue to make sporadic arrests of suspected militants. Various Saudi militant cells have been loosely associated with an umbrella group, al-Qaida in the Arabian Peninsula, but appear to operate independently of any centralised command. Their support base is thought to be narrow. The opposition will be tightly repressed and internally divided. Liberal critics tend to come under more pressure than those with a clearer Islamic mantle. There are also Islamist critics based outside the country, but exiled groups have limited credibility with the domestic audience. Tribal and religious leaders will remain important.

  July 11, 2012

• Structure

  Saudi Arabia: Political structure

  Official name

  Kingdom of Saudi Arabia

  Legal system

  Based on sharia (Islamic law) and the Basic Law (1992); no written constitution

  National legislature

  There is no elected legislature. A Majlis al-Shura (Consultative Council) was appointed in August 1993 and held its inaugural session in December that year

  Head of state

  The king, Abdullah bin Abdel-Aziz al-Saud, acceded to the throne in August 2005 on the death of King Fahd bin Abdel-Aziz al-Saud, who had ruled since 1982. Prince Salman bin Abdel-Aziz al-Saud became crown prince after the death of Prince Nayef bin Abdel-Aziz al-Saud in June 2012

  National government

  Council of Ministers, headed by the king, who holds the post of prime minister. The Council of Ministers exercises both legislative and executive powers

  Main political parties

  Political parties are not permitted

  Council of Ministers

  Prime minister: King Abdullah bin Abdel-Aziz al-Saud

  First deputy prime minister & defence minister: Salman bin Abdel-Aziz al-Saud

  Key ministers

  Agriculture: Fahd bin Abdel-Rahman Balghnaim

  Civil service: Abdul Rahman al-Barrak

  Commerce & industry: Tawfiq al-Rabiah

  Culture & information: Abdel-Aziz al-Khoja

  Defence: Ahmed bin Abdel-Aziz al-Saud

  Economy & planning: Mohammed al-Jasser

  Education: Faisal bin Mohammed al-Saud

  Finance: Ibrahim Abdel-Aziz al-Assaf

  Foreign affairs: Saud al-Faisal bin Abdel-Aziz al-Saud

  Health: Abdullah Rabia

  Higher education: Khaled bin Mohammed al-Anqari

  Housing: Shuwaish al-Duwaihi

  Interior: Mohammed bin Nayef bin Abdel-Aziz al-Saud

  Islamic affairs: Saleh bin Abdel-Aziz al-Sheikh

  Justice: Mohammed al-Eissa

  Labour: Adel Fakieh

  Municipal & rural affairs: Mansour bin Mitab al-Saud

  Petroleum & mineral resources: Ali bin Ibrahim al-Naimi

  Pilgrimage: Bandar al-Hajjar

  Social affairs: Abdel-Mohsen bin Abdel-Aziz al-Akkas

  Telecoms & information technology: Mohammed bin Jamal al-Mulla

  Transport: Jabara bin Eid al-Seraisry

  Water & electricity: Abdullah al-Hussayen

  Key officials

  Chairman of the Consultative Council: Abdullah bin Mohammed al-Sheikh

  Director of General Intelligence: Muqrin bin Abdel-Aziz al-Saud

  Head of National Security Council: Bandar bin Sultan bin Abdel-Aziz al-Saud

  President of the Board of Grievances: Ibrahim al-Hokail

  President of the Supreme Judicial Council: Saleh bin Abdullah bin Humaid

  Central bank governor

  Fahad bin Abdullah al-Mubarak

  December 04, 2012

• Outlook

  Saudi Arabia: Key developments

  Outlook for 2013-17

  • Although its hold over the country is set to remain secure, the ruling Al Saud family will face a number of challenges in 2013-17, including a potentially fractious succession process and demands for political reform.
  • The death of two crown princes in eight months and recent departure of the interior minister, Prince Ahmed bin Abdel-Aziz al-Saud, means that the next crown prince is likely to come from the younger generation of the Al Saud.
  • The government will remain sensitive to fluctuations in global oil demand, as well as possible interruptions to Iranian oil supplies. We expect oil output to decline in 2013-15, before picking up as global demand growth accelerates.
  • We expect the fiscal account to move into deficit from 2015, as the knock-on long-term impact of the spending measures announced in 2011, combined with only slow oil revenue growth, is felt.
  • Saudi economic growth is likely to remain strong over the forecast period, at an average of 4.7%, lifted by rising government capital spending, new investment in infrastructure and growing petrochemicals and aluminium output.
  • We expect Saudi Arabia to return large current-account surpluses over the forecast period, buttressed by rising petrochemical exports. However, the surplus will narrow gradually, as imports increase rapidly.

  Review

  • Ahmed bin Abdel-Aziz al-Saud has been replaced as Saudi Arabia's interior minister. He was arguably the last credible contender for the throne (after the current crown prince) from the oldest generation of the Al Saud.
  • Two border guards have been killed in the east of the province of Najran by al-Qaida-linked militants, who were seeking to cross into Yemen.
  • King Abdullah bin Abdel-Aziz al-Saud has pardoned a jailed popular Islamist cleric, Sheikh Youssef al-Ahmed. However, his release arguably only highlights the difficulty the regime is having in silencing its critics.
  • A popular and regionally influential Saudi cleric (and former dissident), Sheikh Salman al-Awdeh, has urged all non-Syrians to avoid joining the conflict in Syria.
  • The Ministry of Labour has said that it will fine companies that have more foreign than Saudi workers-a penalty that will probably hit nearly all private-sector companies.
  • Saudi Aramco, the national oil company, has awarded a series of construction contracts to a group of Korean, Japanese and local firms to build a 400,000-barrel/day crude oil refinery at the Red Sea city of Jizan.

  December 04, 2012

Economy:

• Background

  Saudi Arabia: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	28.0	Population growth	3.2
  GDP (US$ m; market exchange rate)	597,086b	Real GDP growth	3.7
  GDP (US$ m; purchasing power parity)	687,382	Real domestic demand growth	6.3
  GDP per head (US$; market exchange rate)	21,320	Inflation	5.8
  GDP per head (US$; purchasing power parity)	24,545	Current-account balance (% of GDP)	19.8
  Exchange rate (av) SR:US$	3.8b	FDI inflows (% of GDP)	6.3
  a Economist Intelligence Unit estimates. b Actual.

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  Background: Saudi Arabia was formed in 1932 by King Abdel-Aziz al-Saud. The support of the clerics and the maintenance of a conservative interpretation of Sunni Islam (unofficially known as Wahhabism after a leading 18th-century cleric, Mohammed ibn Abd al-Wahhab) are the traditional cornerstones of the Al Saud family's legitimacy. Since the beginning of large-scale oil production, the distribution of oil revenue has also become a key factor underpinning the Al Saud's maintenance of power. Saudi Arabia is the world's leading oil exporter and has the largest proven crude oil reserves.

  Political structure: Formally, the monarchy has absolute executive power, although the king's legislative power is constrained by the need for legislation to be compatible with Islamic law. Under the 1992 Basic Law, the Quran and the Prophet's sunna (tradition) are the official constitution. In practice, the king requires support from the clerical establishment (ulema). The king is also prime minister, appoints the Council of Ministers and chairs the Supreme Economic Council, which advises ministers. The Consultative Council has advisory powers. Municipal councils were partly elected by male nationals in 2005. The next elections were postponed but finally took place in September 2011. Political parties are illegal.

  Policy issues: The government is expanding the oil and gas industry while trying to diversify the economy into non-oil sectors, including manufacturing and services. It seeks to encourage development of the private sector, notably in services and utilities, but is mindful of the unrest that has swept the region, and so it will raise social spending and provide more public-sector jobs. Reducing unemployment among Saudi nationals is a priority; the government imposes quotas (which vary by sector) on employment of expatriates, who nonetheless make up the vast majority of the private-sector workforce.

  Taxation: Citizens and Saudi businesses pay no tax on income and are only liable for zakat (an Islamic tax on wealth) of 2.5% of net worth per year. Non-Saudi businesses are subject to corporation tax up to a maximum of 20% (with the exception of profits in the hydrocarbons sector, which are taxed on a sliding scale between 30% and 85%). There is no value-added tax.

  Foreign trade: Exports are dominated by oil and, to a lesser degree, by petrochemicals and plastics. Falling oil revenue pushed the trade surplus down to US$105bn in 2009, from US$212bn in 2008. As a result, the current-account surplus narrowed to 5.6% of GDP in 2009, but it bounced back in 2010-12. Crude oil production rose to an average of 9.3m barrels/day in 2011, as Saudi Arabia boosted its output to compensate for outages in Libyan exports.

  Major exports 2011	% of total	Major imports 2011	% of total
  Mineral products	87.2	Machinery & transport equipment	37.7
  Chemicals	4.5	Foodstuffs	14.0
  Plastics	3.9	Chemical & metal products	7.5
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Japan	13.9	China	12.8
  China	13.7	US	11.9
  US	13.4	Germany	7.1
  South Korea	10.2	South Korea	6.0

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  December 04, 2012

• Structure

  Saudi Arabia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 04, 2012

• Outlook

  Saudi Arabia: Country outlook

  Saudi Arabia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The rule of the Al Saud family is expected to remain secure in 2013-17, and thus far the kingdom has remained largely untouched by the Arab Spring. Arguably the greatest challenge confronting the Al Saud will be managing the succession. After the death of two crown princes in just eight months, Salman bin Abdel-Aziz al-Saud was appointed as the next in line in June; however, although the appointment was smoothly handled, the steady depletion of the ranks of the sons of the country's founder, King Abdel-Aziz, makes the task of transferring power to the next generation ever more urgent. Besides internal ruling-family machinations, the Al Saud will remain wary of the potential for popular discontent, given widespread perceptions of corruption, vast inequalities of wealth and high youth unemployment. With this in mind, King Abdullah bin Abdel-Aziz al-Saud announced a raft of welfare handouts and public-sector wage increases in early 2011, followed by another expansionary budget for 2012. In addition, he has introduced some social reforms, including measures to promote women's rights, while simultaneously distancing himself from hardline conservative clerics and restraining the activities of the religious police. However, it is worth noting that neither he nor any of his likely successors has shown any inclination to reduce the Al Saud's domination over the organs of state. Frustrated at the lack of political openings, smaller groups, emulating the tactics of protesters elsewhere, are likely to mobilise in protest against specific issues, as has already been seen with a proliferation of online petitions and, more seriously, with protests and disturbances in the mainly Shia Qatif region of Eastern Province.

  ELECTION WATCH: There is unlikely to be any democratic reform or any move to an elected parliament before the end of the forecast period, and political parties are expected to remain illegal. The king appoints the Council of Ministers and the Consultative Council, which has advisory powers. There are no parliamentary elections. In a sop to liberals, the country's second municipal elections, originally scheduled for 2009, finally went ahead in September last year. However, despite some minor alterations, the councils continue to have only an advisory role. The election generated little enthusiasm, and turnout was some way below that in 2005; as a result, there are tentative discussions ongoing within the Consultative Council about setting up a new, elected merged body that would take on many of the responsibilities of the municipalities. Although it would also have only an advisory role, the creation of such a body would represent a significant expansion of the elected component of government.

  INTERNATIONAL RELATIONS: Saudi Arabia will pursue a sporadically active foreign policy, focused on promoting regional stability. As demonstrated by its decision to send troops into Bahrain in March last year (after an invitation from the Bahraini king), Saudi Arabia will take an active role in countries it deems to be within its sphere of interest, even if this occasionally runs counter to the wishes of the US (its most important strategic partner). This interventionist approach will extend to neighbouring Yemen, where the presence of al-Qaida in the Arabian Peninsula (AQAP, comprising the Saudi and Yemeni wings of the group) is causing particular concern. These worries will have only been further heightened by the killing of two Saudi border guards in November by AQAP-linked militants who were seeking to cross into Yemen.

  POLICY TRENDS: The government will remain a major force in the economy, and the long-term drive to encourage a greater role for the private sector will be tempered by the urgent political need to provide employment for the country's mass of young unemployed and raise living standards. With this in mind, the government will remain sensitive to developments on the international oil markets (as oil revenue comprises 80-90% of fiscal earnings). It has boosted output in 2012, and, alarmed by persistently high prices, the oil minister, Ali bin Ibrahim al-Naimi, pledged in September to take "all necessary steps" to ensure that the oil market is well supplied. The Economist Intelligence Unit thus now expects that the kingdom will maintain high levels of oil output for the remainder of 2012 and into 2013, but that output will fall back in subsequent years in response to the coming on stream of new output from, among elsewhere, Iraq, Brazil and Sub-Saharan Africa. Meanwhile, the kingdom will maintain its long-term strategy of using its energy resources as feedstock for value-added, energy-intensive industries (notably petrochemicals, plastics and aluminium).

  ECONOMIC GROWTH: We estimate that real GDP growth will have reached 5.5% in 2012, on the back of rising oil output, continued fiscal stimulus and rising investment in a host of industrial and infrastructure projects. We expect the rate of economic expansion to slow thereafter, but to remain robust, supported by strong domestic demand growth and the coming on stream of a host of industrial projects. In addition, the impact of the two far-reaching fiscal spending packages announced by the king in early 2011, worth a combined 30% of GDP, will also be felt in the coming years, with a US$67bn programme to build 500,000 affordable homes likely to boost the construction sector throughout the forecast period. However, growth will be dragged down by lower oil production in 2013-15, as Saudi Arabia seeks to buttress prices; accelerating global oil demand growth is expected to see these output declines reversed in 2016-17. Although fiscal recurrent expenditure growth will slow, government capital spending will rise rapidly, pushed up by the massive house-building programme (and plans for new schools and hospitals). Similarly, private investment growth will be stimulated by projects planned or under way (including four proposed new economic cities and a massively expanded rail network). Combined with the coming on stream of a number of major projects, including three refineries and the enormous Sadara integrated petrochemicals complex (due to open in 2015-16), as well as two new offshore and one onshore gasfields and an aluminium smelter at Ras al-Khair, this is expected to keep economic growth robust, at an annual average of 4.7% in 2013-17.

  INFLATION: Saudi consumer price inflation is expected to remain manageable throughout the forecast period, in large part reflecting the maintenance of price subsidies on a range of basic goods, such as foodstuffs and electricity. Inflation was lifted in the first half of 2012 by rising rents-which in the first six months of 2012 rose by over 9% year on year-as supply shortages persisted. However, the coming on stream of new properties (and the passage of the mortgage law, which has made some landlords reluctant to raise rents), has seen consumer price inflation ease markedly over the past three months, and we expect this process to continue. However, the continuing tightening of the Saudiisation programme, including new measures to compel companies to hire (more expensive) Saudi employees, poses considerable upside risk, as businesses may pass on their higher costs to customers. Overall, we believe that inflation will slow to an annual average of 3.9% in 2013-14, as global commodity prices decline and the dollar strengthens, before picking up to an average of 4.7% in 2015-17 as these trends reverse.

  EXCHANGE RATES: Saudi Arabia, Bahrain, Kuwait and Qatar remain committed to plans for a Gulf monetary union, despite the withdrawal from the project of the UAE and Oman. A joint monetary council has been set up, and this is likely to evolve into a central bank. However, the countries still need to agree on various technical issues, and the euro area's current problems will deter them from proceeding for the time being; we do not expect a single Gulf Co-operation Council currency to be set up until after the forecast period. Meanwhile, despite the downgrade last year by Standard & Poor's of the US's credit rating, and the approaching US "fiscal cliff", Saudi Arabia has remained an active buyer of US Treasury bonds, and, given the paucity of alternatives, we expect this to continue.

  EXTERNAL SECTOR: We expect Saudi Arabia to return large but narrowing current-account surpluses, as strong domestic demand sucks in imports. High international oil prices, combined with elevated oil production and surging petrochemical exports, should keep the trade balance comfortably in surplus, although it will narrow steadily. These surpluses will offset persistent deficits on the services and current transfers accounts. Income from investments abroad was sustained through the global economic slowdown, and we expect the income account to return wide surpluses over the forecast period (assisted by rising global interest rates after 2015). Overall, the current-account surplus is forecast to narrow markedly from an estimated 24% of GDP (or US$155bn) in 2012 to 4.3% of GDP in 2017.

  December 01, 2012

• Forecast

  Saudi Arabia: Country forecast summary

  Country forecast overview: Highlights

  • The rule of the Al Saud family will face a number of challenges in 2013-17, including in the near term a potentially fractious succession process and wider demands for political reform. Small groups may mobilise to protest against specific issues, such as youth unemployment or Shia rights, while refraining from directly challenging the position of the Al Saud. The political succession remains a source of uncertainty-two crown princes died in the space of just eight months; the present incumbent, Salman bin Abdel-Aziz al-Saud, is 76; and there are arguably no more plausible contenders from his generation.
  • The government will seek to minimise the destabilising impact of the Arab Spring on its "near abroad", intervening politically and, occasionally when required, militarily. The potential for an escalation in tensions over Iran's nuclear programme will remain a particular source of anxiety, and Saudi Arabia will remain uneasy about perceived Iranian meddling both in the kingdom and in its "near abroad" (notably in Bahrain). The instability in Yemen will also be a concern, as an offshoot of al-Qaida has gained a foothold there.
  • Steady population growth will put pressure on infrastructure, housing and services over the forecast period. The private sector will remain overwhelmingly dependent on foreign workers, owing to local skills shortages, although the government will seek to strengthen "Saudiisation" requirements. In an effort to appease popular disquiet at high unemployment and housing shortages, the government will boost public-sector employment and embark on a huge house-building programme, but with a detrimental impact on the public finances.
  • Real GDP growth is forecast to average 4.7% a year in 2013-17, boosted in large part by an expansionary fiscal stance. Oil will remain the mainstay of export earnings and of government revenue, leaving the economy vulnerable to external shocks.
  • Growth in the public sector is likely to remain strong, owing to major social spending programmes announced in early 2011. However, non-oil private-sector growth will be the main driver of economic expansion, boosted by the growing role of private firms in infrastructure and industry projects. Investment will focus on natural gas and refined oil, infrastructure and energy-intensive industries such as petrochemicals.
  • Despite earlier plans to rein in subsidy outlays, the government, fearful of sparking unrest in the wake of the Arab Spring, will retain subsidies on a host of everyday goods and services. As a result, inflation will remain broadly steady, although it will fluctuate in line with shifts in the US dollar and global commodity prices. We expect consumer price growth to average 4.4% in 2013-17.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	5.5	4.5	4.5	4.7	5.1	4.8
  Consumer price inflation (av; %)	4.4	4.4	3.3	4.3	4.7	5.1
  Budget balance (% of GDP)	12.6	5.0	1.2	-0.3	-1.0	-3.0
  Current-account balance (% of GDP)	23.7	16.5	12.2	9.2	6.6	4.3
  3-month deposit rate (av; %)	1.1	1.0	1.2	1.3	1.9	2.9
  Exchange rate SR:US$ (av)	3.75	3.75	3.75	3.75	3.75	3.75

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  December 04, 2012

View detailed map

Country Briefing

Land area

2.15m sq km

Population

27.1m (2010, Central Department of Statistics and Information)

Key provinces

Population in '000 (2004 census, Ministry of Economy and Planning)

Riyadh (capital): 4,730

Mecca: 5,449

Eastern: 3,009

Asir: 1,637

Medina: 1,379

Jizan: 1,083

Qassim: 980

Climate

Hot and dry, milder in the winter months

Hottest month: July, 26-42°C (average daily minimum and maximum); coldest month: January, 8-12°C; driest months: July, September, October, 0 mm average rainfall; wettest month: April, 25 mm average rainfall

Language

Arabic

Measures

Metric system

Currency

The Saudi riyal (SR) = 20 qirsh = 100 hallalas. The riyal is pegged to the US dollar at a rate of SR3.745:US$1

Time

3 hours ahead of GMT

Fiscal year

Calendar year

Public holidays

All Muslim holidays are observed in accordance with the Islamic or hijri calendar, based on the lunar year, which is about 11 days shorter than the Gregorian year. The weekend is Thursday-Friday. The month of Ramadan (July 20th-August 19th 2012) is not a public holiday but significantly shortens the working day. Eid al-Fitr (marking the end of Ramadan—August 19th 2012) and Eid al-Adha (Feast of the Sacrifice—October 26th 2012, the tenth day of the haj, or pilgrimage) are public holidays. The country's national day is September 23rd and is sometimes a public holiday. Travelling in the kingdom is particularly affected during the haj period, which lasts for about a month, as well as on Eid al-Adha and during the school summer holidays, which last until mid-September

March 09, 2012