SAUDI ARABIA

Economic growth set to remain subdued

B2

MEDIUM RISK for enterprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP
USD793,0bn (World ranking 18, World Bank 2019)
Population
34,27mn (World ranking 41, World Bank 2019)
Form of state Monarchy
Head of government King SALMAN bin Abdulaziz Al Saud
Next elections None
  • Natural resource base (oil and gas)
  • Strategic importance as an oil exporter and with spare capacity to increase output when needed
  • Large financial asset base and strong foreign exchange reserves
  • In time of high oil prices strong fiscal and current account surpluses. These provide a financial buffer when deficits are recorded in times of severely depressed oil prices
  • Net creditor
  • Generally good relations with the U.S.
  • Long-standing and stable exchange rate system
  • Dependence on international oil prices along with a narrow economy focused on the hydrocarbon sector
  • High unemployment and under-employment have the potential to fuel increased militancy, particularly among the minority Shia population
  • Data transparency is below average for a high income economy
  • Regional uncertainties, with land borders with Iraq and Yemen and with Iran as a close neighbor. The latter is seen by some as a competitor for regional power

Trade structure by destination/origin

(% of total)

Exports Rank Imports
China 7%
1
16% China
Japan 6%
2
12% United States
India 5%
3
6% Germany
United States 5%
4
5% United Kingdom
South Korea 5%
5
4% India

Trade structure by product

(% of total)

Exports Rank Imports
Crude Oil 72%
1
8% N.E.S. Products
Refined Petroleum Products 11%
2
8% Cars And Cycles
Plastic Articles 5%
3
5% Engines
Basic Organic Chemicals 3%
4
4% Telecommunications Equipment
Natural Gas 2%
5
4% Aeronautics

As with all GCC states, late payment is common in Saudi Arabia. In practice, the law does not regulate late payment, while late payment interest is prohibited and collection costs cannot be recovered from the debtor unless a specific agreement has been concluded by the parties. As a result, debtors will often try to negotiate discounts in exchange for prompt payment.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

  • Payments

  • Court proceedings

  • Insolvency proceedings

Local legal action is very slow, costly and uncertain overall, since the courts are not bound by a system of precedent and have considerable discretion in applying Shariah principles to specific circumstances. In addition, several weeks or months may separate each hearing and the courts hardly abide by time management requirements.

Insolvency laws in the Middle East are not as sophisticated as in other regions and the nonexistent company rescue culture in Saudi Arabia illustrates this point.

Euler Hermes

Economic Research Team

research@eulerhermes.com

Manfred Stamer

Senior Economist for Eastern Europe and Middle East

manfred.stamer@eulerhermes.com

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