Saudi budget will boost growth in the non-oil sectors and create jobs, say economists

Saudi Arabia plans the highest level of government spending in its history next year when expenditure will hit more than SR1.1 trillion ($293 billion), according to Tuesday’s budget statement. (AFP)
Updated 21 December 2017

Saudi budget will boost growth in the non-oil sectors and create jobs, say economists

DUBAI: Top economists have welcomed the expansionary departure from the tight fiscal control of the past three years reflected in this week’s Saudi budget.
But there was some debate as to the degree of stimulus that will be injected into the economy, the projections for the non-oil economy next year, as well as the possibility of further “austerity” measures in the years leading up to 2023 — when public finances are forecast to be balanced.
Khatija Haque, who leads research at the UAE’s Emirates NBD, said: “The authorities have presented the 2018 budget as an expansionary one that will boost growth in the non-oil sectors, create jobs and invest in the future productive capacity of the economy. The strategy is commendable.”
Jean Michel Saliba, MENA economist at Bank of America Merrill Lynch, said: “The 2018 budget walks a fine line. It is, on balance, expansionary as the austerity pace eases but reforms continue despite revised medium-targets.”
Jason Tuvey, Middle East economist with London consultancy Capital Economics, said: “The Saudi budget showed that the government has already started to loosen fiscal policy and will continue to do so in 2018.”
Ziad Daoud, chief Middle East economist at Bloomberg, said: “The Saudi budget marks a break with the earlier strategy of substantial deficit reduction. This is sensible and will help the economy grow somewhat faster next year.”
However, economists were surprised by the announcement of an extra SR135 billion of expenditure from the Public Investment Fund (PIF) and other government agencies, announced separately from the general budget statement — bringing the total public spend to SR1.1 trillion.
“It’s hard to know how to treat this and to make any comparison, because we do not know how much these agencies spent in 2017,” said Tuvey.
Haque said: “The PIF will set aside SR83 billion for mega infrastructure, real estate and transportation projects; this is likely to include funding for the new city, Neom, that was announced at the investment summit in November. National Development Fund investment of SR50 billion will be used for housing and other initiatives to stimulate private sector growth, create jobs and boost efficiency.”
There was a general consensus that the 2018 budget would help the economy to grow faster. “We now think growth will be closer to 1.5 percent in 2018, compared to our previous forecast of 0.8 percent,” said Tuvey.
The budget forecast growth of 2.7 percent for next year, driven by a leap in the non-oil sector, officially forecast to grow by 3.5 percent.
Haque said: “Given the higher-than- expected rise in public sector spending next year, we have revised our GDP (gross domestic product) growth forecast higher to 2.8 percent, with the increase coming entirely from non-oil sector expansion.”
Daoud said: “Bloomberg Economics has revised up the non-oil GDP forecast for 2018 to 2 percent from 0.7 percent as the amount of fiscal loosening is higher than what was previously penciled in. That’s motivated by the relationship between the non-oil fiscal stance and real non-oil growth.”
But Tuvey cautioned: “Non-oil growth of 3.5 percent would be close to boom times.”
The budget also confirmed that the target date for fiscal balance between revenue and expenditure would now be set for 2023, as the International Monetary Fund (IMF) recommended recently.
Haque said: “We have seen large budgets before. We would argue that the effectiveness of public sector spending is just as important as the sum of money that is disbursed, and improving this will require structural changes in the way ministries and funds are administered and controlled.”
Nasser Saidi, former economy minister of Lebanon and now an independent consultant, said: “Oil-dependent countries face a challenge when they have to undertake economic change. In Saudi Arabia, there is a very clear vision and strategy at the top.”

 


Worshippers flock to reopened Prophet’s Mosque for Friday prayers

Updated 06 June 2020

Worshippers flock to reopened Prophet’s Mosque for Friday prayers

MADINAH: Hundreds of thousands of worshippers attended the first Friday prayers to be held at the Prophet’s Mosque in Madinah since the gatherings were suspended to stop the spread of the coronavirus disease (COVID-19) outbreak.

The green light for the resumption of the prayer meetings came as part of a plan to gradually reopen the Kingdom’s mosques while ensuring worshippers and visitors adhered to preventive measures.

A ban on access to the Rawdah remained in place and only groups of worshippers numbering up to a maximum of 40 percent of the mosque’s capacity were being allowed entry.

Precautionary measures also included the allocation of specific doors for the entry of worshippers, the installation of thermal cameras, removal of all carpets so that prayers could be performed on the marble, sanitization of the mosque’s floors and courtyards, periodic opening of domes and canopies to ventilate the mosque, and the removal of Zamzam water containers.

The Prophet’s Mosque in Madinah will be closed after evening prayers and reopened one hour before dawn prayers. Parking lots will operate at 50 percent capacity and a media awareness campaign has been launched to highlight safety procedures at the holy site.

Medical teams have also been stationed at the main entrances to the mosque in cooperation with the Ministry of Health.

Elsewhere in the Kingdom, worshippers also flocked to perform Friday prayers at mosques amid strict health measures.

On May 31, Saudi authorities reopened all mosques for prayers, except in Makkah, as part of the Kingdom’s plan for a gradual return to normal life.

Last week the minister of Islamic affairs, dawah and guidance said that the country’s mosques were ready to welcome back worshippers, following his field trips to check that necessary preparations had been made.

All worshippers must still maintain a distance of 2 meters between rows, wear masks to enter a mosque, and Friday sermons and prayers have been limited to a maximum of 15 minutes.