Bloomberg reported that Saudi Arabia’s economy will expand 5.3% this year powered by higher oil prices and more government spending in the Arab world’s largest economy.

National Commercial Bank said that the economy will grow 4.2% in 2012. The kingdom will benefit from the recent positive oil price shock” as it raises output 6.2% to average 8.8 million barrels per day this year compared with last.

The kingdom, which depends on oil for 86% of its revenue announced increases in government spending in March. The package included USD 67 billion on housing and funds and followed a USD 36 billion handout announced on February 23.

National Commercial Bank said that the series of royal decrees announced in the Q1 2011 will provide favorable stimulus to the non oil sector, estimated to grow at 5%. The construction and retail sectors will be the key beneficiaries of the new spending.

It said that with higher oil prices, Saudi Arabia will record a budget surplus of SAR 62.8 billion. Oil revenue this year is expected at SAR 828.2 billion.

(Sourced from Bloomberg)