Saudi households to be SR239-a-month better off after reforms, report finds

Cars pictured in downtown Riyadh. Recently introduced grants are boosting average Saudi household income but expatriates are being hit. (Reuters)
Updated 12 February 2018
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Saudi households to be SR239-a-month better off after reforms, report finds

LONDON: Saudi households will be SR239-a-month ($63.64) better off on average following the introduction of recently announced government grants, a report found.
It represents a 1.5 percent increase in average household income, Bank of America Merrill Lynch (BoAML) said.
“The combination of royal grants and household allowance disbursements more than fully shelter Saudi households from the cost of fiscal reform costs,” said chief regional economist Jean-Michel Saliba in the report. “Further out, Saudization efforts and targeted stimulus should support consumption.”
Saudi Arabia recently introduced financial grants aimed at easing the impact of removing subsidies and other ongoing economic reforms under the Vision 2030 strategy. That aims to reduce the country’s reliance on oil by developing new industries which will increasingly rely on Saudi citizens rather than expatriates.
There are about 3 million households in the Kingdom eligible to receive the household allowance known as the ‘Citizens Account’ which was announced in December 2017.
That equates to about 10.6 million people — or more than half of the population.
The bank estimates that almost 67 percent of eligible households receive the full amount of SR900 per month.
The smallest partial coverage payment is SR300 per month.
A massive push to employ more Saudis in the Kingdom is unlikely to trigger the mass departure of expatriates, BoAML said.
It found that despite the introduction of expatriate dependent fees and expatriate levies, many foreigners would still be better off financially than at home.
The reform of the Nitaqat Saudization scheme in mid-December could demand hiring as many as 25,000 Saudis just to maintain compliance levels, the report found.
That could be a boon for overall consumption in the Kingdom but may dent corporate profits because it could raise costs as companies pay more for their staff, BoAML said.
The bank also warned that Saudization should be handled carefully because the process risks prolonging labor scarcity in some sectors of the economy.
The government recently announced limiting 12 retail sector job types to Saudi nationals — however the likely impact on expatriates currently holding jobs in those sectors is difficult to determine because of a lack of job data in those areas.
But BoAML notes that there are some 304,865 expatriates working in sales roles of various type.
Employing more citizens in economically productive jobs is a key plank of Vision 2030. Some employers have struggled to fill certain roles because of a lack of vocational skills in particular areas of demand and shortages of graduates with the relevant degrees in others.


Oil edges up on Saudi output cut and Iran sanctions

Updated 52 min 18 sec ago
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Oil edges up on Saudi output cut and Iran sanctions

  • The cut comes amid expected export declines from Iran once the US re-imposes sanctions on Tehran
  • The OPEC report said it expected world oil demand to grow by 1.43 million bpd in 2019, down from 1.64 million bpd in 2018

SINGAPORE: Oil prices inched up on Tuesday after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply, although concerns over a slowdown in economic growth kept a lid on markets.
Front-month Brent crude oil futures were at $72.85 per barrel at 0658 GMT, up 25 cents, or 0.3 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 25 cents, or 0.4 percent, at $67.45 per barrel.
In July, Saudi Arabia told the producer group of the Organization of the Petroleum Exporting Countries (OPEC) that it had curbed production by 200,000 barrels per day (bpd) to 10.288 million bpd.
The cut comes amid expected export declines from Iran once the US re-imposes sanctions on Tehran’s petroleum industry from November.
OPEC’s monthly report published on Monday, which uses data from secondary sources, confirmed the Saudi cut, which traders said triggered crude’s upward move early on Tuesday.
That came despite the Saudi move coming in anticipation of a slowdown in oil demand.
The OPEC report said it expected world oil demand to grow by 1.43 million bpd in 2019, down from 1.64 million bpd in 2018.
OPEC said the demand slowdown would come on the back of potentially lower economic growth as a result of trade disputes between the United States and China as well as emerging market turmoil.
China’s economy is showing further signs of cooling as the US prepares to impose even tougher trade tariffs, with investment in the first seven months of the year slowing to a record low and retail sales softening, data showed on Tuesday.
“Data from China failed to meet market expectations, which could be another signal that the world economy is slowing down,” said Sukrit Vijayakar.