Saudi economy warms up as private spending rises

The Saudi economy is now showing renewed signs of life, according to Bloomberg Economics’ activity heat map. (Reuters)
Updated 11 May 2019

Saudi economy warms up as private spending rises

  • Bloomberg Economics expects non-oil growth to average 2.6 percent this year, helped by fiscal stimulus
  • The steep decline in oil prices since 2014 has led to budgetary deficits across oil exporting Gulf economies as they seek to reduce their reliance on hydrocarbons

LONDON: Rising private sector consumption and government fiscal stimulus measures are expected to give a boost to the Saudi economy, according to new research from Bloomberg Economics.
It expects non-oil growth to average 2.6 percent this year, up from 2.1 percent in 2018, helped by fiscal stimulus, a lower drag from monetary policy and more spending by the public.
But it is not year clear if the pickup will help to reduce the budgetary deficit.
“In theory, higher growth should reduce the budget deficit,” Ziad Daoud, chief Middle East economist at Bloomberg Economics told Arab News. “But cause-and-effect flows in the opposite direction in this case: The recent uptick in growth was largely driven by higher government spending.”
The steep decline in oil prices since 2014 has led to budgetary deficits across oil exporting Gulf economies as they seek to reduce their reliance on hydrocarbons, roll back state subsidies and seek to boost growth in non-oil industries and services.
A government crackdown on corruption in the Kingdom saw some funds leave the country that may have otherwise been invested domestically.
At the same time the introduction of valued added tax (VAT), costlier fuel prices and rising expatriate levies caused growth in the non-oil economy to slow to 1.6 percent in the first quarter of 2018 compared to 2.3 percent in the third quarter of 2017.
But the Saudi economy is now showing renewed signs of life, according to Bloomberg Economics’ activity heat map. A number of indicators are picking up, showing non-oil growth has returned to levels seen before the corruption purge, it said.
However, while the economy might be showing signs of recovery, it’s still a long way short of the growth rates achieved during the oil-boom of 2004-13, which averaged 7.7 percent a year.
Growth remains mainly driven by an oil financed fiscal stimulus package rather than the private sector, Bloomberg Economics said.


Electric luxury vehicles, SUVs ‘more likely to cause accidents’

Updated 23 August 2019

Electric luxury vehicles, SUVs ‘more likely to cause accidents’

  • As EV sales rise, French insurer AXA warns that drivers are struggling to adapt to cars’ rapid acceleration

LONDON: Electric luxury cars and sport utility vehicles (SUVs) may be 40 percent more likely to cause accidents than their standard engine counterparts, possibly because drivers are still getting used to their quick acceleration, French insurer AXA said.

The numbers, based on initial trends from claims data and not statistically significant, also suggest small and micro electric cars are slightly less likely to cause accidents than their combustion engine counterparts, AXA said at a crash test demonstration on Thursday.

AXA regularly carries out crash tests for vehicles. This year’s tests, which took place at a disused airport, focused on electric cars.

Overall accident rates for electric vehicles are about the same as for regular cars, according to liability insurance claims data for “7,000 year risks” — on 1,000 autos on the road for seven years — said Bettina Zahnd, head of accident research and prevention at AXA Switzerland.

“We saw that in the micro and small-car classes slightly fewer accidents are caused by electric autos. If you look at the luxury and SUV classes, however, we see 40 percent more accidents with electric vehicles,” Zahnd said.

“We, of course, have thought about what causes this and acceleration is certainly a topic.”

Electric cars accelerate not only quickly, but also equally strongly no matter how high the revolutions per minute, which means drivers can find themselves going faster than they intended.

FASTFACT

Accident rates among luxury and SUV electric vehicles are 40 percent higher than for their combustion engine counterparts.

Half of electric car drivers in a survey this year by AXA had to adjust their driving to reflect the new acceleration and braking characteristics.

“Maximum acceleration is available immediately, while it takes a moment for internal combustion engines with even strong horsepower to reach maximum acceleration. That places new demands on drivers,” Zahnd said.

Sales of electric cars are on the rise as charging infrastructure improves and prices come down.

Electric vehicles accounted for less than 1 percent of cars on the road in Switzerland and Germany last year, but made up 1.8 percent of Swiss new car sales, or 6.6 percent including hybrids, AXA said.

Accidents with electric cars are just about as dangerous for people inside as with standard vehicles, AXA said. The cars are subject to the same tests and have the same passive safety features such as airbags and seatbelts.

But another AXA survey showed most people do not know how to react if they come across an electric vehicle crash scene.

While most factors are the same — securing the scene, alerting rescue teams and providing first aid — it said helpers should also try to ensure the electric motor is turned off. This is particularly important because unlike an internal combustion engine the motor makes no noise. In serious crashes, electric autos’ high-voltage power plants automatically shut down, AXA noted, but damaged batteries can catch fire up to 48 hours after a crash, making it more difficult to deal with the aftermath of
an accident.

For one head-on crash test on Thursday, AXA teams removed an electric car’s batteries to reduce the risk of them catching fire, which could create intense heat and toxic fumes.

Zahnd said that studies in Europe had not replicated US findings that silent electric vehicles are as much as two-thirds more likely to cause accidents with pedestrians or cyclists.

She said the jury was still out on how crash data would affect the cost of insuring electric versus standard vehicles, noting this always reflected factors around both driver and car.

“If I look around Switzerland, there are lots of insurers that even give discounts for electric autos because one would like to promote electric cars,” she said.