Particularly significant is the increase in reserve money, which rose by almost 10 per cent between September and October, one of the highest monthly leaps on record. Together with a substantial increase in SAMA's foreign reserves and government deposits held with it, the growth in reserve money is likely to fuel further growth in money supply and the local stock market.

The average cost of living index declined by 0.1 per cent during the second quarter, equating to a 0.4 per cent rise on the equivalent period the previous year. Although transport, foodstuffs and goods all rose, they were offset by sharp falls in the cost of clothes, rent, fuel and water.

In its latest Article IV consultations, published on 5 December, the IMF produced an equally positive outlook. According to the IMF, real gross domestic product (GDP) growth for 2005 is expected to hit 6 per cent, primarily on the back of strong growth in the oil and non-oil private sectors. Per capita GDP is forecast to exceed $13,000, while the current account surplus is projected to reach 30 per cent of GDP.

The central government fiscal surplus is estimated to increase to about 15.5 per cent of GDP on the back of an expected 34 per cent rise in oil revenues and a limited increase in budgetary spending. Gross government debt is expected to be reduced further by 19 per cent, to about 45.5 per cent of GDP.

'Executive directors commended the Saudi authorities for their prudent macroeconomic management, the effective use of oil revenues to invigorate the development of the private sector and the economy's impressive performance,' said the report.

'With large current account and fiscal surpluses, reserves have continued to increase, government debt has declined and the stock market has continued to strengthen reflecting growing confidence.'