04/11/2009
Lecture Session on Current State
of Saudi Economy
Asharqia Chamber yesterday organized a lecture session with the objective of keeping local businessmen abreast of current state of the Saudi economy. Dr. John Sfakianakis, Group General Manager &
Chief Economist of the Banque Saudi Fransi, was the key-note speaker at the lecture session.
Mr. Zamil Abdullah Al Zamil, Board Member of Asharqia Chamber, was present on the occasion. Also present was Mr. Adel S. Al Sarami, Acting Assistant Secretary General, Economic Affairs of the Chamber. A group of local businessmen attended the lecture session, which was conducted by Mr. Waleed H. Al Orainan, Manager of the Chamber's Research and Investment Center.
Mr. Sfakianakis focused on core issues of Saudi economy including inflation, on-going global financial crisis, fluctuation of oil prices, government spending on mega-projects and the growth of Saudi-non-oil sector. He also replied to a number of queries put forward by the local businessmen.
While talking about inflation, he said that although inflation has fallen significantly, it will come back again. Saudi Arabia enjoyed 0.5% inflation for a long period between 1986 and 2007. Year-on-year inflation averaged 5.8 percent over the first seventh months of the year and stood at 4.5 percent in October.
Mr. Sfakianakis noted that rents have remained the main source of inflation, although they have gone down owing to the fact that more new houses are now being built in the country with lower building materials costs. He said that the rent inflation in the Kingdom has not been addressed properly and the recently announced mortgage laws will not be effective unless the whole rent structure is changed.
Rental inflation in Saudi Arabia has remained very high, although it has now started to decline. In July this year, rent inflation was recorded 13.5 percent. Saudi rental inflation reached its peak at 19.8 percent in July 2008.
Food and commodity prices have dropped sharply. Food inflation plunged to one percent in July compared to 11.3 percent in December this year. Food inflation may go up further if an oligopoly is created in the market for price-fixing, said Mr. Sfakianakis.
Although Saudi Arabia has not been unscathed by the global financial crisis, its non-oil sector has grown noticeably, noted Mr. Sfakianakis. He attributed this non-oil growth to prudent and effective measures undertaken by the government. Saudi non-oil sector has increased by around 3 percent per year for the last decade irrespective of what has been happening in other sector of the economy.
