Saudi Arabia will take a cautious approach to opening up its stock markets to international investors, and the country is concerned about speculative interest in oil markets, finance minister Ibrahim Al-Assaf told CNBC.
Al-Assaf said in an interview that the Kingdom worries about high oil prices, and that he believes that speculators are currently propping up the market.
Al-Assaf expects inflation in the Kingdom to remain at current levels – April figures put inflation at 4.8 percent – as the government continues with a spending program and as the country’s growth continues at high levels.
The IMF forecasts that Saudi Arabia’s economy will grow 7.5 percent in 2011. Earlier this year, the government announced around $130 billion in social spending packages as it looked to head off the civil unrest that swept across the region.
There have been recent reports thatthe Saudi stock exchange is looking to become a component of international indexes, including the MSCI. Al-Assaf explained that the government will continue its cautious approach to opening stock markets to foreign investors, so as to avoid attracting the kind of overheating seen in other emerging markets.
Elsewhere at the conference, senior officials from the Saudi government have spoken about the country’s need to continue on its growth path and to diversify its economy away from oil by strengthening its financial sector.
Central Bank governor Muhammad al- Jasser told the conference that the country will be looking for global sources of finance to fuel its development, and that government policy will need to be supportive of international investment.
However, despite the overt focus on macroeconomic factors, analysts at the conference said that all eyes are on politics following the "Arab Spring" of popular revolutions in the region. Saudi Arabia’s position as the economic cornerstone of the Gulf Cooperation Council and its role in energy security mean that its role could be crucial in ensuring both local and global stability.
"Saudi's role is becoming more important than ever before and even if it doesn't need the capital from foreign investment," a prominent bank CEO told CNBC, "it's the international exposure that it receives from being more open that it's after."
In terms of risk, one local analyst told CNBC: "At the moment, stability is returning, at least in the GCC - it will take time to fully recover from the unrest, but slowly the risk will be priced out of the market."