A new year and a new budget is just what Saudi Arabia needed to shrug off the volatility of global equity markets and the fall in crude oil prices in 2018. The expansionary nature of the budget and a resolve to boost capital expenditure comes amid a slightly more upbeat start to the New Year. The United States and China have also begun a series of talks to resolve their trade dispute, which should help calm markets. In addition, oil prices have had a strong start to the year. Despite the drama surrounding Brexit and its possible impact on global markets, the year has been off to a promising start, enabling Saudi authorities to confidently pursue their plans for the year. The focus in the budget on infrastructure projects, including power and renewable energy, should get foreign investors excited about the prospects in the kingdom Fitch Ratings noted that oil exporters, such as Saudi Arabia, will see
significant improvements in their fiscal and external balances in 2018,
driven by a higher average oil price and increases in production after
OPEC and its allies agreed to boost output. Saudi investor and consumer sentiment also remain stable. IHS Markit, which tracks purchasing managers’ sentiments around the world, said December’s data remained comfortably above the 2018 average of 57.6 points, coming in at 58.2. New orders were stronger than seen in the first half of 2018, according to the research house’s monthly survey. Business optimism is also strong in Saudi Arabia, and the future output index climbed to the highest reading in five years, Markit said, with as much as 53.8% of respondents expecting that output will be higher in 12 months’ time, with no firms expecting a deterioration in conditions. While global headwinds remain on the horizon, the Saudi budget should help authorities reach their GDP growth target of 2.6% this year. |