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Saudi Private Sector Support Package Lessens COVID-19 Effects on GDP

The Kingdom Tower stands in the night in Riyadh, in a file photo. (Reuters)
The Kingdom Tower stands in the night in Riyadh, in a file photo. (Reuters)
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Saudi Private Sector Support Package Lessens COVID-19 Effects on GDP

The Kingdom Tower stands in the night in Riyadh, in a file photo. (Reuters)
The Kingdom Tower stands in the night in Riyadh, in a file photo. (Reuters)

A support package provided by the Saudi government to the private sector since the beginning of the outbreak of the coronavirus would contribute to limiting the decline in the GDP by an average of 2.5 percent, according to a study by a Saudi international research center.

The study noted that the financial support measures implemented by the Kingdom to compensate for the economic repercussions of the pandemic in the short term, would reduce the expected decline of the GDP by 2.4 to 2.6 percent.

It noted that the transport, retail and entertainment sectors were the most affected.

The study, titled “Estimating the Impact of the COVID-19 Pandemic on the Saudi GDP, was released by the King Abdullah Petroleum Studies and Research Center (KAPSARC). It revealed that recreational, cultural and sports activities, land and air transport, in addition to retail trade, had topped the list of sectors that were most affected by the pandemic.

This comes at a time when the International Monetary Fund (IMF) expected that Saudi Arabia’s GDP would shrink by 6.8 percent this year.

The new projection for the Saudi economy, the largest in the region, is 4.5 percentage points lower than what the IMF had projected just two months ago.

The IMF, however, raised its estimates for the growth of the Saudi economy during 2021 to 3.1 percent compared to its previous expectations of 2.9 percent, according to the World Economic Outlook report issued this month.

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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq

Inflation in the 20 countries that use the euro currency rose in November — but that likely won’t stop the European Central Bank from cutting interest rates as the prospect of new US tariffs from the incoming Trump administration adds to the gloom over weak growth.
The European Union’s harmonized index of consumer prices stood up 2.3% in the year to November, up from 2.0% in October, the EU statistics agency Eurostat reported Friday.
Energy prices fell 1.9% from a year ago, but that was offset by price increases of 3.9% in the services sector, a broad category including haircuts, medical treatment, hotels and restaurants, and sports and entertainment, The Associated Press reported.
Inflation has come down a long way from the peak of 10.6% in October 2022 as the ECB quickly raised rates to cool off price rises. It then started cutting them in June as worries about growth came into sharper focus.
High central bank benchmark rates combat inflation by influencing borrowing costs throughout the economy. Higher rates make buying things on credit — whether a car, a house or a new factory — more expensive and thus reduce demand for goods and take pressure off prices. However, higher rates can also dampen growth.
Growth worries got new emphasis after surveys of purchasing managers compiled by S&P Global showed the eurozone economy was contracting in October. On top of that come concerns about how US trade policy under incoming President Donald Trump, including possible new tariffs, or import taxes on imported goods, might affect Europe’s export-dependent economy. Trump takes office Jan. 20.
The eurozone’s economic output is expected to grow 0.8% for all of this year and 1.3% next year, according to the European Commission’s most recent forecast.
All that has meant the discussion about the Dec. 12 ECB meeting has focused not on whether the Frankfurt-based bank’s rate council will cut rates, but by how much. Market discussion has included the possibility of a larger than usual half-point cut in the benchmark rate, currently 3.25%.
Inflation in Germany, the eurozone’s largest economy, held steady at 2.4%. That “will strengthen opposition against a 50 basis point cut,” said Carsten Brzeski, global chief of macro at ING bank, using financial jargon for a half-percentage-point cut.
The ECB sets interest rate policy for the European Union member countries that have joined the euro currency.