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Saudi Arabia's population is growing at over 3% a year but GDP shrank slightly last year, and will at best grow by 1% this year. Growth above 2% is not expected until at best next year and more likely 2001.
The 1999 budget assumes a total expenditure of SR165 billion ($44 billion), 12.5% less than 1998's actual expenditures. Total domestic debt will climb to about $143 billion. As usual the government is shunning foreign lenders and intends to cover the shortfall with domestic borrowing. There has, however, been a persistent rumour of a $5 billion loan from Abu Dhabi. This has been denied by the Saudi finance ministry. Also the government in the past has not made a clear division between Saudi Aramco oil-company funds and government borrowing.
The government has so far managed to maintain a currency peg with the dollar, although the forex traders are circling. There has been only one sustained attack on the riyal, in August 1998. If the economic situation deteriorates, another attack is probable. The situation is made worse by Saudi attitudes to foreign participation in its economy, including a complete ban on foreign ownership.