Help is at hand • Chapter summary
Those observing Saudi Arabia’s economy over the last 18 months will have been struck by the delicacy in balancing the mitigation of the impact of the pandemic whilst also continuing to strive toward the national Vision 2030. Indeed, Vision 2030 was premised on an economic model pre-COVID-19 and much of the efforts to maintain the pillars of the vision depended on fast and agile reaction to the pandemic’s impact, as well as the sharp decline in oil prices.
To that end, as was seen across the world, the government responded with emergency measures fiscal and monetary measures. The Saudi Central Bank (SAMA)’s role in acting as a guiding light cannot be underestimated. It reduced its policy rates twice in March and served up SAR50 billion (USD13.3 billion, 2% of GDP) to support the private sector, particularly SMEs. The central bank also covered fees for private-sector stores and entities for point-of-sale and e-commerce transactions for three months in 2020 from March 14 to the end of September.
As of August 2021, the result has been that the stabilization of the Kingdom’s economy in the face of the unprecedented pandemic challenge. The IMF’s outlook on the kingdom’s economy has it growing at a respectable 2.1% in 2021. Fitch Ratings, meanwhile, has revised its forecast to stable, highlighting the government’s tripling of the VAT rate to 15% in July 2020 as crucial. The kingdom’s non-oil economy is projected to grow 4.3 per cent this year.
In January 2021, the Kingdom’s sovereign wealth fund unveiled its five-year strategy, with the aim of doubling its assets to USD1.07 trillion and investing a minimum of USD40 billion a year into the domestic economy until 2025. The investment is expected to create 1.8 million jobs and contribute USD320 billion to the kingdom’s non-oil economy. The increase in jobs is timely and leveraged on a promising unemployment figure of around 8%, its lowest figure in five years.
The balancing act of the last 18 months is one likely to continue for the foreseeable future. The decline in oil prices served as a harsh reminder that the objectives of Vision 2030, to diversify away from oil dependency, remain more salient than ever. Notwithstanding, the urgency with which the government responded to the pandemic and the foresight with which it has launched ambitious economic initiatives indicate the Kingdom is well on its way to achieving its Vision 2030.