Saudi Arabia’s initiatives to move from heavy dependence on the hydrocarbon sector will take time as long-term projects will face challenges such as the transfer of public sector jobs to the private sector, said an industry expert.

Saudi Arabia’s weakness is its dependence on international oil prices along with a narrow economy focused on the hydrocarbon sector, said Euler Hermes, the world’s leading provider of trade-related credit insurance solutions, said in its latest analysis Saudi Arabia.

The country’s strength is its solid banking system, with a large financial asset base and strong foreign exchange reserves.

Jules Kappeler, chief executive officer of Euler Hermes Middle East, Dubai, said: “The Vision 2030 roadmap and the National Transformation Plan 2020 are supposed to herald a turning point for the country. This diversification process relies on initiatives to develop weak sectors such as defence industries, retail, renewable energy and the private sector.“

Kappeler added “Saudi Arabia’s real gross domestic product (GDP) growth dropped to 1.4 per cent in 2016, from 4.1 per cent in 2015 triggered by markedly lower oil prices.”

The fiscal deficit will remain large, forecast at -9 per cent of GDP in 2017, and public debt should further rise to 19 per cent of GDP, said the company.

Looking ahead, Jules said “an improved environment is expected to result in stabilization of GDP growth around +1.5 per cent in 2017.”

 In addition “the current account deficit is forecast to narrow to -3.6 per cent of GDP in 2017 from -7 per cent in 2016”, he noted. – TradeArabia News Service