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Three Indicators Drive Positive Outlook for Saudi Economy Scenarios

Three Indicators Drive Positive Outlook for Saudi Economy Scenarios

Friday, 22 May, 2020 - 08:45

An economic report released by Alkhabeer Capital, an investment service, has revealed the impact of the coronavirus on the Saudi economy.

The report cited three factors driving the positive outlook in future scenarios for the Saudi economy for the rest of 2020.

It explained that there are three possible scenarios based on the available economic data, movement restrictions and social distancing measures, as well as the challenges facing the Kingdom in light of low oil prices.

Titled “The Coronavirus and The Saudi Economy,” the report spots three main axes that affect the performance of the Saudi economy: the extent of social distancing measures, stimulus packages and austerity measures, and oil prices.

The coronavirus death rate in the Kingdom is considered one of the lowest in the world, reaching 0.94 percent compared to the global average of 7.01 percent.

According to the report, the low rate is considered a catalyst to loosen social distancing measures and reopen businesses gradually to help reduce the impact of the virus on the Kingdom's economy.

The report also stated that the incentive packages presented by the Kingdom’s government, which amounted to 177 billion riyals (equivalent to 6 percent of GDP), will help shore up the work of various companies and institutions in the Kingdom.

Nevertheless, austerity measures may obviously affect the level of consumption in the Kingdom for 2020.

Despite the Kingdom being able to diversify its sources of income, the report states that oil still plays a crucial role in supporting the local economy. The coronavirus crisis has caused a drop in the price of Brent crude by 67.8 percent due to the decline in global demand.

"The demand is expected to remain weak compared to last year, as long as the governments of the world continue to implement social distancing measures and place restrictions on the movement of commercial travel and tourism activities," the report said.

Taking all factors into consideration, the report presented three different scenarios of the impact of the coronavirus on the Saudi economy. The optimistic scenario assumes that the peak of virus infections will be reached at the end of May, followed by the easing of restrictions by governments which will contribute to the gradual economic recovery.

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