The malls are full, the cars are fast, the fashions are sharp -- conspicuous consumption is king as Saudis enjoy the benefits of oil at almost $100 a barrel.

Little more than a dusty desert outpost three decades ago, Riyadh is a boom town where even a stock market crash last year and a spike in inflation over recent months have failed to halt the orgy of conspicuous consumption.

Saudis actually like to enjoy life. With restaurants they know very well what they are eating since they travel abroad so much, says Tony, manager of a recently-opened upmarket restaurant in the heart of the shopping district.

Business is very good. If it wasn't, our chain wouldn't be opening more restaurants in Riyadh and other cities.

On the crowded balcony, the chatter of unveiled young women almost drowns out the din of traffic on the street below in the Arabian peninsula's largest city, with four million people.

It's late into the evening but Saudis are out in force early in the week, dining in the city's eateries and clogging its palm-lined boulevards with gas-guzzling four-wheel drives.

Ever since oil moved from a base of $10 a barrel in the late 1990s to nearly $100 this month, the desert monarchy has seen a turnaround in its economic fortunes and a return to some of the profligate spending that characterized the 1970s and 80s.

Every day newspapers carry announcements of new projects costing billions of riyals, a currency whose strength is masked by its tight peg to the U.S. dollar.

The Riyadh Development Authority has been set up to oversee plans to develop a financial centre, technology park and underground metro system.

You can see this boom, and the numbers reflect it, said economist Ihsan Bu-Hulaiga. The Saudi economy will grow by more than four percent this year and private sector growth is around 7 percent.

Saudi Arabia has by far the largest Arab economy, dwarfing countries such as Egypt, which has a population of over 70 million compared to Saudi Arabia's 24 million.

The economic turnaround has helped Saudi Arabia reestablish itself after the September 11 attacks on U.S. cities in 2001, when 15 Saudis were among 19 young Arabs who killed 3,000 people, taking U.S.-Saudi relations to a low.

A stream of foreign leaders have visited Riyadh since King Abdullah took the throne in 2005, as Saudi Arabia forges political and economic links with China, India and Russia, expanding on traditional close ties with London and Washington.


Wealth is throwing up many problems in a country still dominated by an arcane school of Islam that forbids women from driving and maintains strict gender segregation in public.

Urban dilemmas familiar in countries with long cosmopolitan traditions have become pressing issues in cities like Riyadh.

You see a large number of fancy cars and boys cruising around in fancy clothes in fancy cars. But it's not always great -- it makes the traffic crazy, said Ahmed al-Omran, a well-known Internet blogger.

Saudi commentators lament about drugs, teenage joyriding and cultural influences on the growing numbers of young people who have jumped on board the information technology revolution.

The shopping malls show striking contrasts in fashion, from women covered in black from head to toe, with not even their eyes showing, to teenagers with short rough-cut jeans, designer sunglasses and fashionably unfashionable Afro hairdos.

One of the country's most insistent problems is its continued addiction to foreign labor, still hosting 7 million foreigners despite rising unemployment.

The education system continues to produce citizens well-versed in religious tradition but lacking good English, incapable of competing in today's globalize job market. Major firms like Saudi Aramco reeducate graduate hires abroad.

Disparities in wealth distribution mean poverty still exists in a country where the Saudi royals, who monopolize political power, include some of the richest men in the world.

Ordinary Saudis suffer rising inflation in the knowledge that soaring oil prices are making the rich richer. A 2006 bourse crash wiped out the savings of hundreds of thousands.

Analysts say these deep social, economic and political problems will continue to contribute to Islamic militancy.

In Riyadh you have all these projects going on, but around the kingdom it's not at the same pace, said blogger Omran. We heard promises about balanced development but we're not seeing anything being done.

(Reporting by Andrew Hammond, editing by Anthony Barker)