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Through 2011 and the government, influenced by the Arab Spring which has toppled regimes in other regional countries and destabilised others, is pumping some of the surplus from this into a massive stimulus package. The infrastructure investment and higher disposable incomes this will cause will help growth continue at the countrys maritime ports.

Specific investments in expanding these maritime facilities, and in projects such as the Saudi Landbridge, will further boost throughputs. Rail volumes are set to rise on the back of the Landbridge and the North- South Railway, while air freight volumes are being boosted by the continued expansion of national carrier Saudia. Risks are on the horizon, however, as a slowdown in growth in China, and continued economic crises in the West, could lead to another downturn in 2012.

Headline Industry Data

- Total Saudi Arabian trade set to increase 1.5% in 2012 in real terms, with imports growing 5.0% but exports forecast to contract by 2.0%.

- Air freight volumes set to grow 4.9% in 2012, to reach 640,480 tonnes. Growth to 2016 to average 4.5% per annum.

- 2012 tonnage throughput growth at Jeddah Islamic Port forecast at 2.5%, and to average 1.7% a year to 2015.

- 2012 rail freight volumes forecast to grow by 6.3% in 2012 and to average 5.6% over our forecast period.

Key Industry Trends

Saudia Continues Rapid Expansion With Increased European Presence

Middle Eastern carrier Saudi Airlines Cargo (Saudia) is rapidly expanding its European presence, opening new offices and appointing new general sales agents (GSAs) in a number of countries. BMI notes that the airline is just one of a number of Gulf carriers that are expanding rapidly, which is making the traditional market leaders anxious.

Green Light For Landbridge

In October 2011 King Abdullah of Saudi Arabia approved the construction of the Saudi Landbridge, the railway line that will run from the Jeddah Islamic Port on the kingdoms Red Sea coast to the King Abdulaziz Port Dammam, on the Persian Gulf coast. The Saudi cabinet assigned the General Investment Fund to finance the project, which will be opened for private bidding. BMI believes that the project will not only boost rail freight volumes in Saudi Arabia, but will also lead to an uptick in throughput at the two ports.

Jeddah Islamic Port Investments Give Upside Risk To BMI Forecasts

In October 2011 the Jeddah Islamic Port (JIP), Saudi Arabias largest port in terms of both container handling and total tonnage throughput, signed a new deal to upgrade the roads within the facility. BMI notes that this is part of a wider Saudi investment in its maritime facilities and supply chains in general, and provides upside risk to our throughput forecasts for JIP.

Key Risks To Outlook

A sharper-than-expected downturn in the global economy, if it was to translate into a substantial decline in oil prices, could pose significant downside risks to our forecasts for Saudi Arabias fiscal position, leading to a further narrowing of the governments budget surplus. This in turn could have an effect on the countrys freight transport sector as trade flows are affected.