SAUDI: Stimulus will only buy a temporary reprieve

GULF COUNTRIES - Forecast 29 Jul 2019 by Justin Alexander and Rory Fyfe

Saudi Arabia is pressing ahead with a fiscal stimulus to drive growth after several tough years for both consumers and businesses. This stimulus will not be sustainable, and non-oil growth will slow to around 1.8% by 2021 from 2.6% in 2019. As a result, the fiscal deficit will swell to 9% of GDP this year, requiring a further $10-20bn of sovereign external borrowing. Ongoing disapproval about human rights violations, domestically and through Saudi’s foreign interventions, will continue to deter some foreign direct investment. New long-term development plans aim to be transformative but offer no break with the past. Implementation has been difficult while falling employment and the centralization of power don’t bode well.

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