Saudi Budget: Bold, Bluff or Bluster

Saudi Arabians are likely, it is reported, to keep  oil price at $ 80 a barrel for purposes of its 2015 budgeting.  That looks rather a tall order at the given prices today. Hope grows eternally in every human breast. So while the Saudi Arabians have a right to hope, there is little data for such optimism. 

In fact, Japan prices seem declining and industrial production stalling again. This is despite the  Dubai Crude Oil - which is benchmark for Asia oil supplies, having  lost nearly half its value. Japan's Kuroda has still had to talk prices up. So there is no sign as yet of a recovery.

 

With unemployment at about 30 %, Saudi Arabians really have every reason to hope for  a rise. Their talk down strategy having taken them nowhere, Saudi Arabians are now hoping to move up the prices through indications. Domestic pressures (post Feb 2011 Arab Spring) are just too many for comfort.

According to the IMF, between 2006 and 2012, about 5.1 million jobs were created in the GCC (excluding the United Arab Emirates, for which data are unavailable). About 4.3 million of these jobs were in the private sector, while only 0.8 million jobs were in the public sector. Of the 4.3 million private-sector jobs created, nearly 88 percent were filled by foreign workers. In the public sector, nearly 85 percent of the 0.8 million new jobs were filled by nationals. The jobs created in the public sector are largely non productive or disguised unemployment  as there are jobs in sectors like police and defence just for the sake of employment. So the real beneficiaries of employment are expatriate labour. Given that local labour are relatively less efficient,  private sector prefers imported labour. That will become expensive as oil revenues fall. The worst hit would be Bahrain and Oman. Dubai would have to scale down growth projections.

GCC looks set for trying times.