The replacement of Saudi Arabia's heir in April 2015, 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 proving a controversial choice, and could spark future instability.
Saudi Arabia's economic growth will slow considerably in 2016 and 2017 after six consecutive years of strong expansion. The corporate sector will face a much more challenging macroeconomic environment, amidst contractions in public spending, rising energy costs, and tightening liquidity.
Saudi Arabia's austerity budget for 2016 heralds a prolonged period of economic disruption and increased political headwinds. While the government's economic programme has the potential to significantly overhaul the Saudi economy, resistance from the elite and popular discontent will present substantial roadblocks to reform.
The Saudi-led military operation in Yemen has so far achieved few of its desired objectives. 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.
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.
The municipal polls conducted in Saudi Arabia in December 2015 are of mostly symbolic importance, given the councils' limited authority. That said, the election of several women marks a positive evolution in the country's slow and highly managed process of social reform, and we expect women to gain further ground in public life and the private arena over the coming years.
|Real GDP growth, % y-o-y||3.6||3.4||1.5||1.9|
|Nominal GDP, USDbn||753.0||652.5||670.0||743.5|
|Consumer price inflation, % y-o-y, eop||3.0||2.3||3.8||4.0|
|Exchange rate SAR/USD, eop||3.75||3.75||3.75||3.75|
|Budget balance, % of GDP||-3.4||-15.0||-11.6||-9.4|
|Current account balance, % of GDP||10.8||-8.2||-9.4||-5.4|
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