Saudi Arabia Names New Economic Team Amid Record Spending
December 22, 2011, 1:12 PM ESTBy Glen Carey
(Updates with economist comments in seventh paragraph.)
Dec. 13 (Bloomberg) -- Saudi Arabia, the Arab world’s biggest economy, named a new central bank head and shuffled cabinet ministers amidst King Abdullah’s record spending plan to fight unemployment and lessen dependency on oil.
Fahad al-Mubarak was appointed as governor of the central bank, replacing Muhammad al-Jasser, who was named the new economy and planning minister, state run al-Ikhbariya television reported. Tawfiq al-Rabea was appointed trade and industry minister.
Saudi Arabia’s drive to create jobs comes during a wave of popular uprisings in the Middle East, triggered in part by unemployment. King Abdullah announced a $130 billion spending plan in the first quarter and in August 2010 unveiled a $384 billion plan to develop transportation, housing and education.
The country needs the non-oil economy to expand at an average 7.5 percent in the next five years to lower joblessness by half to 5 percent, the IMF said. Non-oil output will slow to 5 percent in 2012 from 5.4 percent this year, while growth in oil GDP will grind to a halt next year, IMF data project.
Saudi Arabia maintained a monetary policy that aimed for stability in the financial industry in the first quarter of this year and last year, the kingdom’s central bank said in an annual report published yesterday on its website.
Growth Slowed
Saudi banks tightened lending criteria after two family owned businesses defaulted on at least $15.7 billion of loans in 2009 and the global credit crisis hurt the economy. Growth slowed to 0.1 percent in 2009 from 4.2 percent the previous year, IMF data show. More than half of new jobs went to foreigners between 2004 and 2009, the International Monetary Fund said in a September report.
“Perhaps they have taken the view that al-Jasser can tackle new challenges at the ministry of economy and planning,” Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank, said in a phone interview. “He has often made comments on broader economic policy issues.”
Under the new central bank governor, the kingdom’s monetary policies are unlikely to change, Kotilaine said. “I don’t think there is any near-to-medium term argument to reconsider the U.S.-dollar peg,” he said. The Saudi riyal is pegged to the U.S. dollar at a rate of 3.75 riyals.
Crown Prince
Saudi Arabia hasn’t experienced the popular uprisings in the Middle East that led the toppling of leaders in Tunisia, Egypt and Libya this year. Saudi Arabia sent troops into Bahrain in March to crush a mainly Shiite-led uprising after accusing Iran of interfering in the affairs of the Persian Gulf country. Iran denies the allegation and accuses Sunni rulers in Bahrain and Saudi Arabia of discriminating against Shiites.
King Abdullah appointed Nayef bin Abdulaziz al Saud, 78, as crown prince on Oct. 28 and later named Prince Salman bin Abdulaziz al Saud as defense minister. The appointments followed the death of Prince Sultan on Oct. 22. Sultan was formerly both crown prince and defense minister.
--Editors: Andrew J. Barden, Inal Ersan, Louis Meixler, Paul Badertscher.
To contact the reporters on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net
To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net
