Recently released market study: Saudi Arabia Retail Report Q2 2013

The Saudi Arabian Retail Report examines the long-term potential of the local consumer market, but flags short-term concerns about the impact of a possible cutback in government spending on Saudi Arabia's economic outlook should the fiscal and current account position deteriorate.

The report examines how best to maximise returns in the Saudi retail market while minimising investment risk, and also explores the impact of slowing export growth on the Saudi consumer and on the ability of producers and exporters to realise returns in the short term.

The report also analyses the growth and risk management strategies being employed by the leading players in the Saudi retail sector, as they seek to maximise the growth opportunities offered by the local market. Saudi Arabia comes second (out of seven) in BMI's Middle East and Africa (MEA) Retail Risk/Reward Ratings, although it underperforms significantly for risk.

Full Report Details at
- http://www.fastmr.com/prod/589242_saudi_arabia_retail_report_q2_2013.aspx?afid=301

Among all retail categories, mass grocery retail (MGR) will be one of the outperformers between 2013 and 2017 in growth terms, with sales forecast to increase by 47.6%, from US$32.70bn to US$48.26bn, as high disposable incomes among a proportion of the population create an increasingly aspirational consumer base interested in premium products. In the competitive arena, BMI sees upside potential in the fact that nonorganised retail and independent outlets still account for more than 40% of total sales, which is strong evidence that significant scope remains for the penetration of organised grocery retailing.

Over the last quarter, BMI has revised the following forecasts/views:

* BMI expects Saudi Arabia to remain on a solid growth path throughout 2013, as the non-oil sector continues to expand on the back of booming household expenditure and another strongly expansionary budget from the government. However, a projected fall in oil production should prove a net drag on economic performance, and we do not see the Saudi economy reaching the growth rates of previous years. We forecast real GDP growth of 4.1% in 2013, down from our previous forecast of 4.5%, and from growth of 6.8% in 2012.
* We expect private consumption to remain buoyant throughout 2013, with forecast growth of 5.0%. The retail sector has undergone a sustained boom since government spending began accelerating in 2011. Unemployment benefits introduced in late 2011 (Hafiz), in addition to recent government initiatives aiming to increase the employment of Saudi nationals in the private sector (Nitaqat), should help to stimulate consumption from lower-income nationals. For instance, an effective minimum wage of SAR3,000 (US$800) for Saudis working in the private sector was implemented from February 2 (companies can opt to pay less, but will then find it harder to meet their Nitaqat quotas).

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