The breakeven oil price is set to rise to $95 in Saudi Arabia in 2012. Currently the breakeven price is $80, up from $50 in 2008.
This could pose a potential risk to the country’s growth strategy. Earlier in 2011, the government drew up a $120bn investment programme to steer its economy away from oil.
“There has been increased government activity and investment in response to the Arab Spring and to address the concerns of the population,” says Kai Stukenbrock, direct of sovereign and international public finance ratings at US-based ratings agency Standard and Poor’s.
One of the main challenges facing the kingdom is job creation. It is expected to cut back on 20 per cent of expat jobs and offer them to Saudi nationals, this equates to about 3 million jobs.
“This runs the risk of shocking the labour market,” says Stukenbrock as Saudi nationals are expected to receive a higher wage package than expats.
Saudi Arabia’s economy is expected to grow by 3.7 per cent next year.
The overall picture for the GCC looks set to be positive. This year will see the highest growth since the onset of the financial crisis.
“Oil exports, except Bahrain are doing well and many of the GCC states have a fiscal surplus,” says Stukenbrock.