Saudi Arabia Country Risk Report Q3 2015 - New Study Released

Core Views

* Salman bin Abdulaziz has become Saudi Arabia's new ruler, following the death of King Abdullah in January 2015. While the rapid nominations of a new heir and deputy crown prince resolve the question of succession for now, the risk of divisions between members of the royal family remains prominent. We expect policy continuity, but see Yemen as a potential flare point.
* A wide-ranging cabinet reshuffle by King Salman consolidates his authority at the expense of the sons of the previous ruler, Abdullah. Salman will pursue Abdullah's economic and fiscal policies for the time being - but social reforms will be limited.
* In spite of the slump in oil prices, we have marginally raised our outlook for Saudi Arabia's economy on the back of the government's determination to keep fiscal policy on an expansionary footing. We now forecast real GDP growth of 3.7% in 2015 (using 1999 as a base year), driven by strong consumption and investment.
* Developments in Egypt, Syria and Iran have disrupted relations between Saudi Arabia and its traditional ally, the United States. Although we expect the alliance to remain firm over the coming years, we note that Riyadh's foreign policy risks have increased, with the prospect of a US-Iran detente presenting a particular quandary to Saudi policymakers.
* Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its key bases of support, given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment coupled with a lack of political liberties mean that tensions will continue to linger.

Full Report Details at
- http://www.fastmr.com/prod/1003959_saudi_arabia_country_risk.aspx?afid=301

Key Risks To Outlook

* The government's recent intensification of workforce nationalisation efforts (under a programme known as 'Saudisation') poses a downside risk to the economic outlook. We expect heightened 'Saudisation' measures to add to the costs for the private sector over the coming...

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