Mood sours among Saudi busi­ness­men as oil slides

The Pak Banker - - BUSINESS -

Saudi Ara­bian en­tre­pre­neur Es­sam alZamel has over­come many ob­sta­cles to found a string of tech­nol­ogy com­pa­nies in the past decade, but he thinks slid­ing oil prices will be hard to han­dle.

"A black eco­nomic cloud is cov­er­ing the skies of Saudi Ara­bia," Zamel tweeted last week, warn­ing that prices might not re­cover for five or 10 years. Oil's drop to sixyear lows, less than half mid-2014 lev­els, is be­gin­ning to sour the busi­ness mood in the world's top oil ex­port­ing na­tion. Af­ter a decade of sky-high oil rev­enues and rapid growth, Saudis are grap­pling with the idea they may be en­ter­ing a long pe­riod of more mod­est eco­nomic cir­cum­stances. That re­al­iza­tion is re­flected in a tum­bling stock mar­ket and a public de­bate about the king­dom's eco­nomic fu­ture - some of it com­ing close to crit­i­ciz­ing gov­ern­ment pol­icy, which is un­usual in a coun­try where dis­sent is tightly con­trolled. "Over the past 10 years, ex­pert ad­vice has been ig­nored. The eco­nomic sys­tem did not heed it and pre­ferred to sleep on the cush­ion of the oil boom," tweeted prom­i­nent economist Ab­dul­hamid al-Amri.

Saudi Ara­bia must wean the pri­vate sec­tor off an ad­dic­tion to oil-fu­eled gov­ern­ment spend­ing and curb spec­u­la­tion in the stock and real es­tate mar­kets, which is widen­ing so­cial in­equal­ity, he wrote. Other econ­o­mists and busi­ness­men are urg­ing of­fi­cials to do more to di­ver­sify the econ­omy, re­duce the king­dom's de­pen­dence on mil­lions of for­eign work­ers, and re­struc­ture state spend­ing. Con­sul­tant Fawaz al-Alami wrote in the Al Watan news­pa­per that in­stead of is­su­ing bonds to fi­nance it­self in an era of cheap oil, the gov­ern­ment should save money by cut­ting sub­si­dies that keep elec­tric­ity prices low - a po­lit­i­cally sen­si­tive re­form from which author­i­ties have so far shied away.

Fi­nan­cial re­serves mean Saudi Ara­bia is far from cri­sis. With Brent crude at $45 a bar­rel, the gov­ern­ment is run­ning an an­nual bud­get deficit near $150 bil­lion - but it has over $600 bil­lion of for­eign as­sets at the cen­tral bank and lit­tle debt.

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