(Updates with al-Jasser comments starting in fourth paragraph.)
Sept. 28 (Bloomberg) -- Saudi Arabia’s central bank governor cut his forecast for the kingdom’s economic growth this year to 5 percent and said inflation is set to slow.
The economy will probably also expand by about 5 percent in 2012, central bank Governor Muhammad Al-Jasser told Asharq Al- Awsat newspaper today. The bank’s previous forecast for this year was 6 percent. Inflation “began to stabilize and it should decline in the future,” Al-Jasser said, according to the London-based newspaper.
Saudi Arabia, the Arab world’s biggest economy, this year announced about $130 billion in additional spending to create jobs and ward off the political unrest sweeping through other Middle Eastern countries. The government had already pledged a $384 billion, five-year development plan to build new houses and expand non-oil industries.
Saudi Arabia is in a “in a better situation than others,” al-Jasser was quoted as saying by Asharq Al-Awsat. “We hope that the global economy is not entering in a new downturn of fear and weakness, especially in the big financial institutions in Europe.”
Europe’s debt crisis has generated as much as 300 billion euros ($408 billion) in credit risk for the region’s banks, the International Monetary Fund said last week. Al-Jasser said earlier this month Saudi Arabia doesn’t have plans to buy any European debt. Some European countries are struggling to service debt, and that has put the continent’s banks in a “difficult situation,” he told Asharq Al-Awsat.
Saudi Arabia may cut oil production next year if the European debt crisis worsens and Brent crude falls toward $90 a barrel, Sonia Song, HSBC Holdings Plc’s head of Asia oil and gas research, said at the bank’s Global Natural Resources conference in Singapore. The government needs higher prices to finance its budget, Song said.
The country produced about 9.85 million barrels a day last month, according to Bloomberg data.
Saudi inflation was 4.8 percent in August, down from a high of 6.1 percent in 2010. The central bank said in August that inflation may accelerate during the third quarter on higher consumer spending.
--With assistance from Maher Chmaytelli in Dubai. Editors: Ben Holland, Karl Maier.
To contact the reporter on this story: Glen Carey in Riyadh at firstname.lastname@example.org
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