Event
Saudi Arabia is stepping up its embrace of the leading political umbrella of Syrian opposition groups, the Syrian National Coalition (SNC), amid increasing press reports of its role in channelling arms supplies to rebel fighters.
Analysis
The Saudi crown prince, Salman bin Abdel-Aziz al-Saud, attended the Arab summit in Doha, Qatar this week, where the SNC was for the first time the official Syrian representative. Saudi Arabia's ostensibly independent al-Arabiya satellite channel, based in Dubai but which has strong Al Saud connections, carried the speech of the leading SNC figure (and until recently its president), Moaz al-Khatib, live. The summit was notable as it was the first time that the Arab League had formally consented to the arming by its members of the Syrian rebels (although it has long been reported that such clandestine activity is taking place). Reinforcing this message, Prince Salman's speech in effect rejected any sort of diplomatic solution, thus firmly ruling out any sort of negotiated compromise involving the Syrian president, Bashar al-Assad.
A host of press articles in the US this week, including in the New York Times, have provided more information about the role of Saudi Arabia, Qatar and Jordan in the supply of arms from Croatia to Syrian rebels via Jordan and Turkey. Some of these arms have allegedly been used in the southern Syrian city of Deraa, close to the Jordanian border. Saudi Arabia remains concerned that such arming should not benefit al-Qaida type groups such as Jabhat al-Nusra, which has grown in strength inside Syria. The dangers of "blowback" along the lines that Saudi Arabia suffered in the mid-2000s, when radicalised Saudis who had fought in Iraq switched to targeting the Saudi establishment, are well understood. This week the Ministry of Interior said it would arrest Saudi fighters returning from Syria. However, allegedly, these concerns do not prevent individual and quite high-level Saudis funding a wide variety of Syrian groups, including armed Islamists.
March 27, 2013
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
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
Second deputy prime minister: Muqrin 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
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
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
March 07, 2013
Outlook for 2013-17
Review
March 07, 2013
Fact sheet
| Annual data | 2012 | Historical averages (%) | 2008-12 |
| Population (m) | 28.9 | Population growth | 3.2 |
| GDP (US$ m; market exchange rate) | 749,732 | Real GDP growth | 4.3 |
| GDP (US$ m; purchasing power parity) | 855,883 | Real domestic demand growth | 8.9 |
| GDP per head (US$; market exchange rate) | 25,941 | Inflation | 5.9 |
| GDP per head (US$; purchasing power parity) | 29,614 | Current-account balance (% of GDP) | 17.1 |
| Exchange rate (av) SR:US$ | 3.8 | FDI inflows (% of GDP) | 4.9 |
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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 current-account surplus down to 4.8% of GDP in 2009, but it subsequently bounced back. Crude oil production rose to an average of 9.3m barrels/day (b/d) in 2011 and 9.9m b/d in 2012 as Saudi Arabia boosted its output, initially to compensate for outages in Libyan exports, and subsequently to cover for falling Iranian oil exports.
| Major exports 2011 | % of total | Major imports 2011 | % of total |
| Mineral products | 87.2 | Machinery & transport equipment | 38.4 |
| 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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March 07, 2013
Data and charts: Annual trends charts
March 07, 2013
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, with the youngest surviving son of King Abdel-Aziz, the kingdom's founder, Prince Muqrin bin Abdel-Aziz al-Saud, made second deputy prime minister (and in effect second in line) in February. Although both appointments were smoothly handled, the steady depletion of the ranks of the sons of King Abdel-Aziz makes the task of transferring power to the next generation ever more urgent.
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 Majlis al-Shura (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 2011. However, the councils continue to have only an advisory role, and the election generated little enthusiasm. Although a higher turnout is likely in the next election--reflecting plans for women to be given the vote for the first time--more radical proposals are being tentatively discussed 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 2011 (at the invitation of 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 (comprising the Saudi and Yemeni wings of the group) is causing particular concern. These worries will have been only further heightened by the assassination of a Saudi diplomat in the Yemeni capital, Sanaa, in late November.
POLICY TRENDS: The government will remain a major force in the economy, and the long-term drive to boost the role of the private sector will be tempered by the urgent political needs to provide employment for the 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 boosted output for most of 2012 to cover for the slump in Iranian oil exports, but reduced production sharply around the end of the year in response to rising output in, among others, Iraq and the US, as well as lower seasonal domestic demand. The Economist Intelligence Unit expects that this cut will be maintained into 2013, but that output will rise from 2014 as the global economic recovery picks up pace. 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: The government has given a provisional estimate for real GDP growth in 2012 of 6.8%; however, we consider this figure to be unrealistic given that the economy grew by an average of just 5.8% in the first three quarters of the year, and economic output in the fourth quarter will have been hindered by a dip in oil production. As a result, we retain our estimate that real GDP growth reached a still impressive 5.7% in 2012, on the back of rising oil output, continued fiscal stimulus and rising investment in a host of industrial and infrastructure projects. However, growth is expected to slow to 4.1% in 2013, in line with a reduction in our projection for oil production that year. Nonetheless, the rate of economic expansion should remain robust, supported by strong domestic demand growth and a host of planned 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 the US$67bn affordable homes programme likely to boost the construction sector throughout the forecast period.
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 2012 by rising rents-which rose by an average of 9% over the year as a whole-as supply shortages persisted. However, the coming-on-stream of new properties helped consumer price inflation ease markedly over the second half of the year. More recently, however, core inflation has begun to pick up (rising to 4.2% in January from 3.9% at end-2012), raising concerns that the continuing tightening of the Saudiisation programme, including new measures to compel companies to hire (more expensive) Saudi employees, is causing companies to pass their higher costs on to customers. Overall, though, we believe that inflation will average a relatively low 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 GCC currency to be set up until after the forecast period.
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 and aluminium 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, we forecast that the current-account surplus will narrow markedly from an estimated 20.5% of GDP (or US$154bn) in 2012 to 3.6% of GDP in 2017.
March 11, 2013
Country forecast overview: Highlights
Country forecast overview: Key indicators
| Key indicators | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Real GDP growth (%) | 5.7 | 4.1 | 4.9 | 5.0 | 4.8 | 4.8 |
| Consumer price inflation (av; %) | 4.5 | 4.4 | 3.3 | 4.3 | 4.7 | 5.1 |
| Budget balance (% of GDP) | 12.7 | 4.3 | 1.2 | -0.1 | -0.8 | -2.5 |
| Current-account balance (% of GDP) | 20.5 | 13.3 | 10.1 | 7.9 | 5.6 | 3.6 |
| 3-month deposit rate (av; %) | 1.1 | 1.0 | 1.2 | 1.3 | 1.9 | 2.9 |
| Exchange rate SR:US$ (av) | 3.75 | 3.75 | 3.75 | 3.75 | 3.75 | 3.75 |
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March 07, 2013
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):
Mecca: 5,449
Riyadh (capital): 4,730
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
January 10, 2013