Consumers in Saudi Arabia are thus far reportedly feeling few effects of the fall in oil prices on the broader Saudi economy, Bloomberg reports, though the government is taking measures to curb spending and adjust its fiscal policy to new realities.
“It’s Saudi policy in action,” writes Bloomberg. “When the revenue slows down, as it’s doing now, the kingdom’s rulers would rather run huge budget deficits” than squeezing consumers. “Eventually, economists say, something may have to give.”
Saudi Arabia’s HRH King Salman.
What might be giving in at first is Saudi fiscal policy, which could later impact consumer spending. For now, Saudi Arabia is aware that it has a significant budget balancing challenge in the face of low oil prices. Recently, Saudi Arabia’s credit rating was downgraded by Standard and Poor’s to A+, the fifth-highest level, and Saudi foreign reserves have reached a 3-year low.
The Saudi government is assessing steps to tighten spending including establishment of a dedicated project management office that “will report to the Committee of Economic Development, chaired by Deputy Crown Prince Mohammed Bin Salman,” Bloomberg also reported today, citing sources.
The government is also eyeing energy subsidy cuts as a potential money-saver. A raise on domestic energy prices was acknowledged to be under consideration by Ali Al-Naimi, Saudi Arabia’s Minister of Petroleum and Natural Resources, in response to a question by reporters in Riyadh, Quartz reports, citing a Wall Street Journal article.
