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Extra spending to give another boost to Saudi economy.

Bahrain and Yemen aside, the turmoil in the Middle East has turned into a boon for Saudi Arabia, as the country's coffers swell with the proceeds of climbing oil prices and production. And, a series of subsidies and other measures worth as much as $ 133 billion will help ensure the bounty reaches ordinary Saudis.

National Commercial Bank, a Saudi lender, raised its outlook this week to 5.1 percent from a previous 4 percent. Barclays Capital is planning to revise its forecasts shortly as is Bank of America. A poll of economists taken last week before the second of two government spending plans was unveiled showed the Saudi economy growing by 4.5 percent this year, slightly faster than previously expected.

Where unrest and uncertainty are weighing down on most regional

economies, Saudi Arabia is an exception these days to the trend in the Middle East.

As supplies from Libya have fallen and worries that other exporters may cut output as well, oil prices have risen about 20 percent this year. Benchmark Brent crude for May delivery traded at about $ 115 for a barrel. Economists estimate that for every $ 10 increase in the price, Saudi Arabia can increase its budget by 6 percent of gross domestic product.

And, with the world's biggest reserves and excess capacity, Saudi Arabia is benefiting twice over by raising output to fill the Libyan gap.

"On the oil side, recent events have been unambiguously positive," Daniel Kaye, senior economist for National Bank of Kuwait, told the media.

Meanwhile, two royal decrees announced over the past month call for $133 billion in new government spending - a figure equal to an eye-popping 30 percent of the country's GDP. The money will be spent for everything from pay raises for civil servants to building homes to adding more people to the security forces.

Kaye and other economists said the extra spending will also give another boost to the economy and address some of its structural problems, like a persistent housing shortage and high unemployment.

National Commercial Bank estimates the two initiatives will generate some 150,000 jobs directly and indirectly, equal to nearly a third of the estimated number of jobless. Another 60,000 jobs will be created by hiring more security personnel at the Interior Ministry.

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Publication:Saudi Economic Survey
Geographic Code:7SAUD
Date:Mar 30, 2011
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