Country Economic Forecasts > Saudi Arabia

With oil prices weak and continuing concern about the state of the public finances, pressure on the currency peg intensified during November, with the one-year dollar riyal forward rate rising to a level only exceeded in 1999 when oil prices were close to $10 pb. Admittedly, the pace of decline in SAMAs net foreign assets slowed in October, but the commitment to the dollar peg is likely to be tested further. Meanwhile, on the growth front, there has been more evidence of a slowdown in non-oil activity, which has prompted us to downgrade 2016 non-oil GDP growth to 1.5% from 1.9% previously. And with the latest OPEC meeting confirming that OPEC and Saudi would not constrain output despite the current oil glut, we see only a modest rise in hydrocarbon sector output of 1.5% next year and expect overall GDP growth to slow to 1.5% from 3.6% this year. Attention will now turn to the governments 2016 budget traditionally released towards the end of December for signs of spending cuts to contain the forecast sharp rise in the fiscal deficit.