Saudi Arabia Country Risk Report

Published 26 August 2015 | Quarterly

  • 50 pages
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$1,195.00
Saudi Arabia Country Risk Report

Core Views

  • The replacement of Saudi Arabia's heir on April 29, along with other major changes in the country's leadership, represent a further consolidation of King Salman's authority. That said, the elevation of the king's son as second in line to the throne is likely to prove a controversial choice, and could spark future instability.

  • The new king has quickly consolidated his authority over Saudi Arabia's economic policy apparatus, restructuring the country's administration and taking steps to improve the coordination of its vast public investment plans. That said, these changes have so far not greatly altered the economic policy line pursued by Saudi Arabia, and we retain our view that Salman will maintain his predecessor Abdullah's reforms and energy policies.

  • Saudi Arabia's economic outlook remains favourable in spite of the continuing slump in oil prices, but we expect growth to moderate heading into 2016. The forces bolstering economic activity - a sustained expansion in government spending and increases in oil production - will gradually tail off over the coming quarters.

  • The Saudi-led military operation in Yemen has so far achieved none of its desired objectives, and further airstrikes are unlikely to make a tangible difference to the balance of power on the ground. A move towards political dialogue between the warring factions is likely, but any agreement between Saudi Arabia and Yemen's Shi'a Houthi rebels will be difficult to reach and even more difficult to implement.

  • Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its key bases of support, given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment coupled with a lack of political liberties mean that tensions will continue to linger.

Key Risks To Outlook

  • The government's recent intensification of workforce nationalisation...

Executive Summary
5
Core Views
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Succession Shake-Up Consolidates Salman's Authority
8
TABLE: POLITICAL OVERVIEW
8
Foreign Policy
9
Few Ways For Saudi Arabia To Achieve Its Aims
9
TABLE: YEMEN - SUMMARY OF POLITICAL SITUATION
10
Long-Term Political Outlook
11
Scenarios For The Coming Decade
11
Chapter 2: Economic Outlook
15
SWOT Analysis
15
BMI Economic Risk Index
15
Economic Activity
16
Forces Lifting Saudi Economy Tailing Off From 2016 Onward
16
TABLE: Economic Activity
16
Fiscal Policy
19
Tapping Reserves Best Option For Saudi Policy-makers
19
TABLE: Fiscal Policy
19
Regional: Banking Sector
20
Brightening Prospects For Non-Gulf Banks In MENA
20
Regional: Private Consumption
22
Saudi, UAE, And Egypt Lead The Way
22
TABLE: MENA - REAL PRIVATE CONSUMPTION GROWTH, %
23
TABLE: MENA - PRIVATE CONSUMPTION, USD PER CAPITA
24
Chapter 3: 10-Year Forecast
27
The Saudi Arabian Economy To 2024
27
Politics Main Risk To Long-Term Outlook
27
TABLE: Long -Term Macroeconomic Forecasts
27
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: Operational Risk
30
Legal Environment
31
TABLE: MENA - Legal Risk
32
Costs Of Labour
35
TABLE: MENA - Labour Cost Risk
35
TABLE: Regulations Governing Fle xibility Of Workforce
36
Chapter 5: Key Sectors
39
Freight Transport
39
TABLE: Rail Freight
40
TABLE: Air Freight
40
TABLE: Maritime Freight
41
Tourism
42
TABLE: Inbound Tourism
44
TABLE: Outbound Tourism
45
Other Key Sectors
47
TABLE: Oil and Gas Sector Key Indicators
47
TABLE: Pharma Sector Key Indicators
47
TABLE: Telecoms Sector Key Indicators
48
TABLE: Infrastructure Sector Key Indicators
48
TABLE: Defence and Security Sector Key Indicators
48
TABLE: Autos Sector Key Indicators
49
TABLE: Food and Drink Sector Key Indicators
49
Chapter 6: BMI Global Macro Outlook
51
Global Outlook
51
EMs Still Slowing
51
Table : Global Assumptions
51
Table : Developed States , Real GDP Growth, %
52
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Table : Emerging Markets , Real GDP Growth , %
53

The Saudi Arabia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Saudi Arabia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Saudi Arabia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Saudi Arabia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Saudi Arabia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Saudi Arabia, including currency volatility, the commodity price boom and protectionist policies.

The Saudi Arabia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Saudi Arabia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Saudi Arabia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Saudi Arabia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Saudi Arabia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Saudi Arabia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Saudi Arabia over the next 5-years?

BMI's Saudi Arabia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Saudi Arabia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Saudi Arabia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Saudi Arabia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Saudi Arabia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Saudi Arabia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Saudi Arabia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Saudi Arabia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Saudi Arabia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Saudi Arabia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Saudi Arabia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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