Government expenditure as a percentage of the kingdom’s gross domestic product increased from 30 per cent in 2008 to 40 per cent last year. State spending rose from SR520bn ($140bn) in 2008, to SR550bn in 2009, and is forecast to hit SR621bn in 2010.

The state-backed Public Investment Fund and the Saudi Industrial Development Fund have played important roles in keeping the economy moving – albeit with a mere 0.2 per cent real growth in 2009 – by boosting their investments in projects. But sentiment in the private sector continues to be weak. Despite interest rate cuts and the reduction of reserve requirements for banks in the kingdom, lending is not rising and banks have focused on paying off foreign liabilities or buying foreign securities instead.

The $20bn debt default by two large Saudi conglomerates last year also continues to weigh heavily on confidence in the banking sector. But without a return to private sector growth, the strength of the economic recovery will be unsustainable.

At present, Riyadh is carrying the economy but for the stimulus to be deemed a success, the private sector will eventually have to lead the growth.