Saudi Arabia: changing times?

Published 14 November 2016

The 2017 outlook for the Saudi Arabian cement sector remains neutral unless the government continues its spending spree. But as the subdued oil price environment calls for a more-diversified economy and spending cuts to rein in costs, cement demand in the kingdom could be in for a gloomy ride in the medium term. By Santhosh Balakrishnan, Riyad Capital, Saudi Arabia.

As oil prices remain subdued, Saudi Arabia may need to rein in its construction ambitions

 The Kingdom of Saudi Arabia (KSA) is the largest economy in the Middle East with a nominal GDP of SAR2.5trn (US$666bn) in 2015.

The IMF estimates that real GDP growth will average just 2.1 per cent over 2016-18, which, coupled with the current subdued oil price environment, will make it tough when it comes to capital expenditure.

This is in stark contrast to the expansionary budgets of 2010-15, driven by growth rates above five per cent and heightened oil prices exceeding US$100/bbl.

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