Saudi economy seen benefitting from increased oil production

Tuesday, April 29, 2003

ABU DHABI Saudi Arabia is expected to benefit from increased oil output and higher prices.

A report by Middle East Focus, publication of Standard Chartered Bank, said the Saudi economy will be bolstered over the next year by a short-term increase in oil prices. The report expected Riyad to maintain higher oil output.

Byt 2004, however, the Saudi economy will begin to feel the affects of a fall in oil prices as well as lower production. The report said the kingdom will also be hurt by an expected increase in U.S. interest rates.

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The report said Saudi Arabia has not exploited the last two years of increased oil revenue to resolve structural problems in the economy. The report cited rising unemployment, estimated at 16 percent, as well population growth.

"The only credible long-term solution is to raise sustainable growth," the report said. "This can not be done without a radical overhaul of the economy. State dominance of the economy must be cut, the role of the private sector promoted and reforms introduced to provide a conducive investment environment."

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