Economy bouyant despite government's fiscal woes - Saudi Arabia

In 1991, U.S. exports to Saudi Arabia increased by a hefty 63 percent (to $6.6 billion) over 1990. Although some of this growth can be attributed to the Gulf crisis, the increase includes a broad spectrum of products. While future export growth may not continue so dramatically, U.S. interest in the region is on the upswing and a reinvigorated U.S. commercial presence in the Kingdom is making itself felt. Our imports from Saudi Arabia increased less rapidly (22 percent) over the same period, but with an import bill of $12.2 billion in 1991, our oil-fueled $4.4 billion trade deficit with Saudi Arabia is substantial.

In early January, the Saudi government announced a budget for the first time since January 1990 (the Gulf War prevented implementation of a new budget in 1991). The 1992 budget anticipates expenses of $48.4 billion and revenues of $40.3 billion, leaving a projected deficit of over $8 billion. This will be the tenth consecutive year of a budget shortfall. Major expenditures include $14.5 billion for security and $13.9 billion for "vital projects." Unfortunately, the budget materials offered virtually no details concerning the composition of spending included within this large allocation for vital projects. It is possible that a portion of this allocation will also be used for military projects. The budget's surprisingly large deficit and very conservative revenue forecast are unpleasant reminders that the Saudi government's fiscal problems remain, although the budget picture is expected to improve as the Saudi postwar economy continues to stabilize.

Despite the government's fiscal difficulties, economic expansion is taking place and business confidence is soaring, spurred in large measure by the massive expansions of Saudi Aramco and Saudi Basic Industries Corporation (SABIC) Saudi banks are flush with liquidity but lack attractive domestic instruments to absorb their mostly short-term deposits. The Saudi stock exchange is recording record volumes of trading, reflecting an abundance of private liquidity in search of a limited number of shares. For the right investment projects, U.S. business should have little difficulty finding Saudi capital.

Saudi Arabia places few restrictions on imports and it offers a promising market for a wide variety of goods. U.S. companies in the hydrocarbons, construction, engineering, transportation, telecommunications, and health care sectors offer services and goods that are complementary to the Saudi economy. American firms in die defense equipment and training fields may find the Kingdom to be a critically important market as U.S. defense spending declines.

American brand names enjoy a good reputation, but Saudi Arabia is far from being a captive market of the United States. Despite the good feelings generated by the U.S.-Saudi partnership during the Gulf War, continued American success will be based on hard, competitive business criteria such as price, quality and delivery. U. S. trade promotion events scheduled through the end of the year include a U.S. pavilion at the Saudi Medicare '92 Exhibition (Nov. 8-12) and a matchmaker trade mission on oilfield, refinery, and petrochemical equipment and services (Nov. 10-17). For further information on Saudi Arabia, contact the Commerce Department's Saudi Arabia Desk Officer at (202) 377-4652.

COPYRIGHT 1992 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group