Saudi Arabia plans to build schools, hospitals, housing and other infrastructure projects as part of a five-year plan budgeted at USD$385 billion (NZD$545 billion), according to a GulfNews.com report.
The report, quoting state-run Saudi Press Agency, said the country’s foreign population, many of them workers from India, Pakistan and the Philippines, jumped by 37% in census data released last week.
The biggest Arab economy and world’s top oil exporter, the kingdom’s SAR1.44 trillion-plan exceeds its previous five-year development plan by 67%, the report said. It was announced by Economy and Planning Minister Khalid Bin Mohammad Al Qusaibi after being approved by Saudi Arabia’s Council of Ministers on Monday.
“This … basically solidifies the government’s commitment on all the important sectors,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.
Just over half the spending is devoted to manpower, education and training. That includes plans to build technology colleges and vocational schools while 19% of the funds will be devoted to the health care sector and 7% to housing.
Monica Malik, senior economist at EFG Hermes, said the planned spending would support estimates for economic growth.
“With increased government investment, we forecast that real non-oil GDP will accelerate to 4.6% in 2010 and will remain between 4 to 5% over the next five-year period,” she said.
During the global financial crisis two years ago, Saudi Arabia announced a USD$400 billion stimulus plan, the biggest of any government as a percentage of gross domestic product.
Annual inflation soared to a record high 11.1% hit in July 2008, falling back to a two-and-a-half year low of 3.5% last October. It has risen since, hitting 5.5% in June, its highest level in at least a year.
“The investment programme is adding to inflationary pressure,” said Malik at EFG Hermes, noting any suppression of domestic demand from inflation would be largely mitigated by the higher investment and consumption from a population influx.
“We forecast that Saudi Arabia will see the highest inflation level in the GCC region,” she said, referring to the Gulf Cooperation Council which groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Finance Minister Ebrahim Al Assaf, whose ministry wields control over the country’s budget, told Reuters in an interview in late May that the kingdom would stick to its 2010 national budget, which was set at SAR540 billion.
He also reiterated the kingdom’s official line that an oil price between $70 and $90 is good for the market. Oil early this week was near $80 a barrel.