JEDDAH: Saudi Arabia has embarked on a journey of economic transformation with the announcement of Budget 2016 and long term benefits will outweigh short term pain, said a Riyadh-based economic analyst.

“Domestic and international investors will gain confidence in macro outlook. Recovery in oil prices will be the icing on the cake,” he told Arab News.

His remarks came as Saudi Arabia asserted this week that it does not limit its output and has the capacity to meet additional demand.

Global oil prices rose on Thursday but were still headed for a second year of steep declines.

“Petrochemical producers are in for another tough year with prices remaining subdued and new higher prices for gas feedstock,” commented James Reeve, deputy chief economist and assistant general manager, Samba Financial Group.

Tracking oil prices, petrochemical industry shares in the Saudi Stock Marker finished the year 27 percent lower.

Mohamed Ramady, independent energy expert and former Professor at King Fahd University, told Arab News: “The change in energy prices  will affect petrochemical  producers  competiteviness in the short term  but  the majority of  Saudi  petrochemical projects  are  more  efficient  and will adapt  to the new energy  prices  through higher  productivity measures.”

He also downplayed any negative impact in the long term.

The Tadawul All-Shares Index (TASI) dropped 17.06 percent at 6,911.76 points, falling for the second year in a row.

During December, the TASI dropped to a three-year low, despite new rules allowing foreign institutions to trade directly on the Saudi bourse.

The market was pulled down by the leading petrochemicals sector, which dipped 27 percent. Most of the remaining 15 sectors also dropped.

Brent crude was up $1.34 at $36.80 a barrel by 1818 GMT Thursday, rebounding from a near 11-year low of $36.10 earlier in the session. For the month, it was down 15 percent and for the year, it fell 34 percent.

In New York, the Dow Jones Industrial Average also dropped on Thursday.