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Charlemagne's Gems: Saudi Arabia's hidden opportunities

by Julian Mayo on Mar 05, 2014 at 14:33

Charlemagne's Gems: Saudi Arabia's hidden opportunities

Saudi Arabia is the world’s second largest oil producer. 

It has a per capita income on a par with the EU average, yet it is not usually considered a developed market nor even an emerging market. 

The word ‘market’ is key, because its stock market is not open directly to foreigners. Instead, investors must buy stocks indirectly via banks. 

In many other respects, however, it is a country worthy of investigation. The country has a young and rapidly growing population, the number having almost doubled since 1990 to 30 million.  The median age is only 25 years.

As with the fellow members of the six-nation Gulf Co-operation Council (GCC), government spending is the primary driver of its economy. 

It has grown fourfold in the decade to 2012 to around US$600 billion.  Despite this, the country continues to run a fiscal surplus and the Kingdom typically uses a conservative oil price assumption (currently, around $70/barrel) for its budget. 

Foreign reserves are not disclosed but are thought of as being somewhere between $500 billion and $1 trillion. The latter figure would be the third highest in the world, after China and Japan. 

The trade surplus is in excess of $200 billion while inflation has hovered around the 5% level.

Since the start of the Arab spring in December 2010, the Saudi government has significantly increased the allocation to social spending.  

Education, healthcare and low income housing were allocated 25% of total expenditure in 2014 budget. In addition, the government has initiated unemployment benefits and salaries have been raised. 

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