Our comprehensive assessment of Saudi Arabia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Saudi Arabia, as well as the latest industry developments that could impact Saudi Arabia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Saudi Arabia before your competitors.

Country Risk

Saudi Arabia Country Risk

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Core Views

  • 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.

  • Saudi Arabia's economic performance will remain largely insulated from the recent decline in international oil prices. We do not expect the government's expansionary fiscal policy to change significantly over the coming quarters, and public spending will continue to support both private consumption and fixed investment.

  • We forecast real GDP growth of 3.6% in 2015, a slight moderation from an estimated 4.3% in 2014 due to the normalisation of domestic oil...

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Saudi Arabia Operational Risk Coverage (9)

Saudi Arabia Operational Risk

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BMI View : Saudi Arabia is as an attractive proposition for foreign investors on account of its status as the region's largest economy, its minimal tax burden and strong information and communications technology performance. Overall, Saudi Arabia offers comparatively low risks to investors with regards to the good quality of its transport network and utilities costs, the comparatively limited bureaucracy surrounding trade flows (reducing the risk of delays and high costs), low crime rates and limited employment costs owing to the lack of an official minimum wage. However, incoming businesses face significant labour market risks due to a small domestic labour force with basic numeracy and literacy skills, a lack of female workers and rising government focus on the ' Saudisation ' of the workforce, which...

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Saudi Arabia Crime & Security

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BMI View: Despite the potent threat of terrorism, Saudi Arabia's low level of criminal risks , coupled with its competent police and counter-terrorism forces ensure that foreign workers and businesses are largely safe within the country. However, expatriate must strictly observe Saudi cultural norms and laws. The country remains vulnerable to terrorist threats and the potential for social unrest, while geopolitical risks are high due to the Kingdom's ongoing proxy struggle with Iran. Taking these factors into account, Saudi Arabia receives a score of 52.5 out of 100 for Crime and Security Risk, placing fifth in the Middle East and North Africa ( MENA) region , below the majority of its GCC counterparts. 

Businesses face the...

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Saudi Arabia Labour Market

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Saudi Arabia offers a large labour pool of nationals and expatriates, with an increasing level of education within its work force over recent years. The country also has a high quality healthcare system, low labour costs and a high degree of labour flexibility. However, low levels of female labour force participation, poor quality education, and the 'Saudisation' of the labour force increases operational risk for businesses. Overall, we have given Saudi Arabia a total Labour Market Risk score of 60.1 out of 100. This puts the Kingdom in third place in the Middle East and North Africa (MENA) region, between its Gulf Cooperation Council (GCC) peers Qatar and the UAE and less than 10 points below the regional leader, Israel.

Although Saudi Arabia has made use of a large pool of low-skilled foreign labour (who currently account for 27% of the population) over the past decades, the government has stepped up efforts to cut the number of expatriates...

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Saudi Arabia Logistics

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BMI View: Saudi Arabia boasts a high - quality transport network that offers investors a number of advantages in terms of trade options, while planned infrastructural projects will ensure that the Kingdom's logistics network is increasingly integrated into regional and international trade routes. Despite a high degree of global connectivity, the country's trade performance remains limited by a moderately burdensome bureaucracy and limited growth options for an already well developed trade economy. While businesses enjoy an abundance of energy and fuel at subsidised costs, water scarcity and moderate internet penetration rates hold back the country's potential in the realm of u tilities. Taking these factors into account, BMI awards Saudi Arabia...

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Saudi Arabia Trade & Investment

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BMI View: As the Arab world's biggest economy, Saudi Arabia offers a large market to foreign investors. Moreover, a low tax regime and relatively strong intellectual pr operty rights help to bolster the investment environment . That said, the country lags the front runner in the Middle East and North Africa (MENA) region - the UAE - for several reasons, including various disincentives to foreign direct investment and an opaque and unpredictable legal system. We have given Saudi Arabia a score of 54.4 out of 100 i n our Trade and Investment Risk Index. This places it in eighth place in the region out of 18 co untries ...

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Saudi Arabia Industry Coverage (23)

Agribusiness

Saudi Arabia Agribusiness

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BMI View: Saudi Arabia will increasingly be dependent on global grain supply, as the country has decided to phase out domestic grain production in a bid to preserve the country's water supply. The government has not abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand capacity production. This strategy has paid off, as the three major producers in the sector have all started heavy investment initiatives .  We believe Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its meat and food processing industry in the coming years. However, the country will remain highly vulnerable to volatile grain and feed prices. Recent spikes in feed prices have...

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Autos

Saudi Arabia Autos

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New car sales have seen impressive growth in Saudi Arabia year-to-date, rising by a reported 12% over H114, to 408,073 units. June was a particularly strong month, with sales rising by 19% year-on-year (y-o-y). BMI believes this performance was bolstered in part by seasonal promotions.

On current trends, full-year sales would be just above the 815,000 unit mark. As such, BMI retains its forecast of 5.4% growth in new car sales this quarter. The country's macroeconomic backdrop remains broadly favourable, with BMI's Country Risk team forecasting real GDP growth of 4.3% in 2014 and having now revised up its growth forecast for 2015 to 3.6% (from 3.3%) on the back of an increasingly positive outlook for construction activity. Indeed, we see Saudi Arabia's economic performance remaining strong heading into 2015, owing to elevated domestic demand and accelerating progress on...

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Commercial Banking

Saudi Arabia Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Saudi Arabia Consumer Electronics

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BMI   View : The mid- to high-end consumer electronics devices market in Saudi Arabia will experience strong value growth during our forecast period, through to 2018, on the back of rising income wages, especially for public sector workers. However, growth in the low-end of the market will be constrained by the exit of a considerable number of migrant workers in the last two years under the government's 'Saudization' policy.

Headline Expenditure Projections

  • Computer Hardware Sales: USD2.5bn in 2014 to USD2.9bn by 2018. The desktop and notebook market is forecast to stabilise in 2014 after decline in 2012 and 2013, before recovering in the latter years of our forecast through increased hybrid notebook volumes. ...

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Defence & Security

Saudi Arabia Defence & Security

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BMI View:   Within an extremely complex region, Saudi Arabia's security and defence situation faces a number of challenges both on the internal and external front. BMI thinks that Saudi Arabia's defence and security policy-making is been affected by internal political rivalry within the Kingdom. Our view is that it is unlikely to become involved in an interstate conflict, and that its traditional leverage in Yemen, where it has previously intervened has been weakened . We think that its decision to join the coalition against the Islamic State is illustrative of a continuing counter-terrorism policy in view of its fears of attacks inside the Kingdom.

On the interstate front, Saudi Arabia seems to be continuing attempts to improve its relations with Iran to iron out some of the...

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Food & Drink

Saudi Arabia Food & Drink

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BMI View:   We maintain our bullish outlook for Saudi Arabia's food and drink market over our forecast period to 2018. Sales will continue to benefit from rising disposable incomes, favourable demographics, increasing urbanisation and ongoing formalisation of the mass grocery retail (MGR) sector.

Headline Industry Data

  • Total food consumption (local currency) growth (y-o-y) in 2014: +8.0%; compound annual growth rate (CAGR) 2013-2018: +7.6%

  • Per capita food consumption (local currency) growth (y-o-y) in 2014: +6.0% ; CAGR 2013-2018: +5.8%

  • Total soft drinks value (local currency) sales growth (y-o-y) in 2014: +7.5%; CAGR 2013-2018 +7.6%

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Freight Transport

Saudi Arabia Freight Transport

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It is a mixed picture for the Saudi Arabian freight transport sector in 2014 and 2015. A number of the Kingdom's ports are expected to see another year of throughput declines in 2014, though we believe they will return to growth the following year. We believe that growth at Saudi Arabian ports will return to strength over the medium term and the construction of new facilities, while potentially impacting on some existing ports like the Jeddah Islamic Port, will serve to strengthen the sector further. The outlook for growth in air and rail freight volumes is broadly upbeat, however. Air freight will continue performing well with the help of national carrier Saudia, and the country's rail freight sector is expanding at an impressive rate.

Specific investments in expanding maritime facilities, and in projects such as the Saudi Landbridge and the north-south railway, coupled with strong economic growth on the back of large...

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Information Technology

Saudi Arabia Information Technology

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BMI View:  Saudi Arabia offers compelling growth opportunities for IT solution providers across multiple industry verticals owing to the kingdom's strong macro fundamentals and the government's economic diversification plan, which is driving growth and investment in the private sector. We believe that global IT firms with considerable local presence will benefit the most from this opportunity. A number of major IT firms have already taken steps in recent years to ramp up their operations in the country, usually through partnerships with local system integrators .

Headline Expenditure Projections

Computer Hardware Sales: SAR10.3bn in 2013 to SAR10.6bn in 2014, +2.6% in local currency terms. Desktop and notebook volumes are expected to stabilise in 2014, while the continued growth of the tablet market will see total value...

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Infrastructure

Saudi Arabia Infrastructure

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BMI View :  Saudi Arabia has emerged as one of our choice markets for both scale and growth opportunities over our 10 year forecast period to 2023. We see 2015 being a bumper year of real growth at 10.5% year-on-year, with average growth over the forecast period at 8.7%. We forecast strong growth across all sectors over the medium term; the residential and non-residential sectors especially will drive growth over the long-term - specifically the industrial construction sector.

Key Trends informing BMI's View:

  • The security situations in both Iraq and Yemen have deteriorated heavily in recent months. Not only does this raise the chance that a Saudi military intervention in either state will occur - raising regional tension and making an attack within Saudi Arabia by AQAP or IS even more likely - but may also drain...

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Insurance

Saudi Arabia Insurance

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BMI View: Over 2015 Saudi Arabia's insurance sector will continue to record solid single-digit growth , largely due to steady demand for compulsory, basic lines. Low penetration levels and market fragmentation will remain the greatest barriers to insurers achieving above-average growth in premiums. Despite the opportunity for a period of consolidation over the long-term, we believe that the market will remain relatively unchanged, at least over 2015

BMI takes the view that despite the market achieving solid growth over the forecast period, significant barriers will remain for many insurers. Continued market fragmentation will suppress growth. The main issue is that demand is largely focused on basic compulsory lines. Therefore, insurers can only compete on the basis of price in these lines rather...

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Medical Devices

Saudi Arabia Medical Devices

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BMI Industry View: The late-November 2014 decision by OPEC to maintain its oil production ceiling, and thereby allowing lower crude prices for the coming months, raises downside risks to the Saudi Arabian medical device expenditure forecast. While the country is relatively well-placed to withstand lower government revenue, mainly due to its considerable foreign currency reserves and assets, questions will be increasingly raised over budget allocations, including state-funded healthcare projects.

Headline Industry Forecasts

  • Saudi Arabia's medical device market has experienced volatile but overwhelmingly positive growth over the past five years. The country was slightly affected by the downturn in the global economy in 2009. This resulted in lower oil prices and subsequently growth in...

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Metals

Saudi Arabia Metals

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BMI View : S audi Arabian meta ls consumption growth is set for rapid growth over the coming years as the country embarks on a construction boom. We forecast strong growth in steel production, however, it is unable to keep pace with domestic demand and thus the country will be more reliant on imports in future. We do not expect any slowdown in construction activity even with the decline in oil prices.

Saudi Arabia will become increasingly reliant on steel and iron ore imports over the coming years as domestic production is unable to keep pace with the country's infrastructure boom. Production will still see rapid growth rates as SABIC expands production at one of its largest refineries. Steel consumption growth rates will be some...

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Mining

Saudi Arabia Mining

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BMI View:   We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a...

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Oil & Gas

Saudi Arabia Oil & Gas

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BMI View: In an attempt to maintain crude oil export shares in Asia and with increasing use of domestic crude for its refineries, we expect Saudi output to remain stable over the coming months should oil prices remain above the USD90/bbl level. This will see average production of about 9.73mn b/d for 2014, a small increase from 2013 production of 9.68mn b/d, but lower than the record production year of 2012. We do however expect to see a small decline in crude exports with the start of the Yasref refinery. While this is not a 'cut in output' per say, the Kingdom maintaining production at 9.6mn b/d will result in a n effective 'crude export cut' of 200,000b/d cut by the end of the year. The outlook for gas remains tight, despite ambitious plans to tap unconventional resources; we believe that rising consumption and faltering supplies may yet see the Kingdom seriously consider...

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Petrochemicals

Saudi Arabia Petrochemicals

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BMI View:   The Saudi petrochemicals industry is pressing ahead with expansion, but there are signs that investors are re-examining expansion plans in the light of slowdown in China and India and the massive increase in shale-based production in the US, according to BMI 's latest Saudi Arabia Petrochemical Report.

A number of shut-downs were reported in Q314 which reduced Saudi Arabia's total output and helped tighten markets at a time when they faced increased uncertainty. Tasnee & Sahara Olefins (TSOC) shut down its ethylene and propylene production plant in Al Jubail industrial city, Saudi Arabia, throughout September due to planned maintenance work. The plant produces 1mn tpa of ethylene and has propylene production capacity of about 285,000tpa. Production losses due to closure were...

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Pharmaceuticals & Healthcare

Saudi Arabia Pharmaceuticals & Healthcare

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BMI View:   We expect heavy investment into Saudi Arabia's healthcare sector to continue, particularly as the government sees the sector as key to the diversifica tion of the economy. The medical tourism industry in particular provides opportunities for both pharmaceutical and medical device companies. We expect multinational companies will continue to dominate the local market despite stringent regulatory laws.

Headline Expenditure Projections

  • Pharmaceuticals: SAR24.65bn (USD6.58bn) in 2013 to SAR28.15bn (USD7.52bn) in 2014; +14.2% in both local currency and US dollar terms. Forecast upgraded from Q414 due to the availability of new pharmaceutical trade data.

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Power

Saudi Arabia Power

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BMI View: We maintain our positive outlook for Saudi Arabia 's power sector and we expect it to register signi ficant growth over our 10 -year forecast period to 2023 . Our constructive view of the market is underpinned by the vast power generation expansion plans devised by the government , the country's...

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Real Estate

Saudi Arabia Real Estate

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BMI View:   With governmental policies   facilitating   market access for international investors, the relatively high sector returns are increasingly attracting foreign investors. While the commercial real estate sector in the office and retail segments is characterised by oversupply, growing demand will help close this gap and help enable room for new projects.

The increasing opening of the Saudi Arabian market is likely to lead to growing investment flows into the country. While one of the largest markets in the region, it has remained largely undeveloped due to regulatory restrictions. Thus, the market provides ample business...

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Retail

Saudi Arabia Retail

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BMI View:   As a market with substantial untapped potential and a vibrant economy, Saudi Arabia is extremely attractive to foreign retailers. Further opportunities are likely to arise in 2015 with the announcement that the kingdom plans to open up its stock market to international investors, giving them access to its USD530bn bourse. In November 2014, the retail portion of the SAR22.5bn (USD6bn) initial share sale by Saudi Arabia's National Commercial Bank was 23 times subscribed. The retail portion comprised 15% of the bank's stock.

Retail groups in Saudi Arabia have generally targeted the three largest urban commercial areas - Jeddah, Riyadh and Dammam/Khobar/Dhahran ('the triplet cities') - but they are now moving into other areas. UAE-based conglomerate Landmark Group's fashion brand Citymax/Max opened its 100th outlet at Al Roudah Plaza,...

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Shipping

Saudi Arabia Shipping

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There is a mixed picture for Saudi ports in 2014, with a number of the major facilities looking likely to endure a second consecutive year of contractions. However, throughput at Saudi ports will be supported by local shipping companies Bahri and Vela Shipping which are in the process of completing their merger. Considerable investment into new facilities is also continuing apace.

Headline Industry Data

  • 2014 port of Jeddah Islamic Port tonnage throughput forecast to decline for a second consecutive year, by 7.0%. Growth will average 2.9% to 2018.

  • 2014 port of Jeddah Islamic Port container throughput forecast to decline for the second year running, by 7.0%. Growth will average 4.8% to 2018.

  • 2014 total trade forecast to see real growth of 3.5%. Growth will average 2.8%...

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Telecommunications

Saudi Arabia Telecommunications

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BMI View:   T he   biggest growth area in Saudi Arabia's telecoms market is high-value services for corporate and individual customers. This view is supported by operators' fi nancial and operational results which show a strong uptake of next generation mobile and wireline data services as well as convergence services. The major service providers will focus on these areas in the future as they look to offset the impact of stagnating mobile subscriptions growth owing to market saturation and increased regulatory scrutiny of SIM card registration and ownership.

Key Data

  • Mobile subscriptions declined by 2.2% q-o-q and 4.2% y-o-y in Q114, according to the regulator's data.

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Tourism

Saudi Arabia Tourism

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BMI View: BMI expects religious visits to remain among the main drivers for the tourism industry over the medium term. Saudi Arabia is home to Mecca and Medina, two of Islam's holiest cities, and every year millions of Muslims come to Mecca for the hajj, the largest annual pilgrimage in the world.

A total of 1.38mn foreign pilgrims performed the hajj in 2013, down by 21% year-on-year (y-o-y) due to health fears, but this is still a substantial customer base. The authorities' move to create a tourist visa for religious visitors and extend their stays could therefore provide a strong boost to tourism receipts over the medium term. In this context, in November 2013 Saudi Arabia announced a relaxation of visa restrictions for overseas visitors, allowing foreign nationals travelling to the country for pilgrimage to stay for a longer period of 30...

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Water

Saudi Arabia Water

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BMI View: The Saudi Arabian water sector remains one of the most active in the region and offers some of the greatest opportunities to private sector participants. In particular, we highlight the continued growth in desalination projects and ongoing water reclamation developments as offering significant potential. However, the country continues to be constrained by limited fresh water resources and rising domestic and industrial demand. Desalination is expensive and requires vast electricity resources . M oreover , electricity generation itself uses significant volumes of water in the cooling processes for thermal generation, and although Saudi Arabia is increasing its solar generation, additional industrial demands are weighing down on water resources. 

Backed by a multi-billion dollar infrastructure...

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