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RIYADH (Reuters) - Saudi King Abdullah unveiled a series of benefits for Saudis estimated to be worth $35 billion on his return home on Wednesday from three months abroad for medical treatment.

The action plan, which includes funding to offset high inflation, to help young unemployed people and support families to get affordable housing, was made as popular protests over poverty, corruption and repression hit many Arab countries.

Hundreds of men in white robes performed a traditional Bedouin sword dance on special carpets laid out at Riyadh airport as they prepared to greet the monarch, thought to be 87.

State television presenters wore scarves in the colours of the Saudi flag in coverage termed "the joy of a nation" to mark the king’s return.

Political stability in the top OPEC producer is of global concern as Saudi Arabia controls more than a fifth of oil reserves, is a major holder of dollar assets and a vital regional U.S. ally.

The measures did not include political reforms in the absolute monarchy such as municipal elections, as demanded by liberals and opposition groups. The Gulf Arab state has no elected parliament or political parties and does not tolerate public dissent.

"I think it’s good but we need to see more reforms such as municipal elections and better regulation. Financial benefits work only if officials can be held responsible," said a Saudi political analyst, who declined to be identified.

Abdullah travelled to the United States in November for surgery to a herniated disk which caused blood accumulation around the spine. He has been recuperating in Morocco for the past four weeks.

During the king’s absence, his slightly younger half-brother Crown Prince Sultan was in charge. However, doubts remain over his health as he was abroad for much of the past two years for illness.

REFORMS NEEDED

Analysts do not expect unrest like in Egypt or Tunisia since the Gulf Arab state sits on more than $400 billion in petrodollars, but say Riyadh needs to address social pressures such as high youth unemployment and extensive housing problems.

"Housing and job creation for Saudis are two structural challenges this country is facing," said John Sfakianakis, chief economist at Banque Saudi Fransi, who put the total value of the king’s measures at 140 billion riyals ($37.33 billion).

EFG-Hermes estimated the package at around 100 billion riyals, saying it could trigger a rally in the stock market, that lost 4 percent over the past week mainly on unrest in Bahrain, as it would have a positive impact across the economy.

Saudi Arabia, a member of the G20, outlined spending of 580 billion riyals for 2011, its third straight record budget and the king said last month expenditures are going to rise in the coming years.

Like other Arabs, Saudis watching the fall of Egypt’s Hosni Mubarak and Tunisia’s Ben Ali Zine al-Abidine have started calling on social media for reforms in the strict Sunni kingdom.

Hundreds of people backed a Facebook campaign calling for a "day of rage" on March 11 to demand an elected ruler, greater freedom for women and release of political prisoners.

Under the king’s measures announced on Saudi TV, the state will pay aid for unemployed young people and tuition fees to study abroad, while waiving loans.

A state programme to help Saudis to get affordable housing will be supported alone with 40 billion riyals but the unnamed Saudi analyst said the plan did not fix the problems that much of land is owned by royals.

"It’s good to give aid but there is no land available. The land should be returned to the state or otherwise much money would be spent buying back land to build new housing," the analyst said.

The government has been mulling for years a mortgage bill to address the housing issue but analysts say no consensus has been reached how to fix the crucial land issue.

Riyadh has been keen to show its Western allies there will be no power vacuum despite its octogenarian rulers’ health problems. But Abdullah’s medical troubles have raised concern over whether he will be succeeded by a reformist like himself or a conservative.

If Abdullah and Sultan are both incapacitated, Interior Minister Prince Nayef, the veteran security chief who is a conservative and appears to be lukewarm on reforms, has the best chance of becoming king.

So far only sons of state founder King Abdul-Aziz Ibn Saud can become king, but only 20 are left and many are sick. Abdullah has set up a family council to regulate succession but it is unclear how and when it will set in motion.