After the death of King Abdullah and the smooth succession to Saudi Arabia’s new King Salman, the new Custodian of the Two Holy Mosques announced a one-off $32.3 billion spend of two months of wages and other cash handouts to Saudi citizens, government employees, soldiers, pensioners and students on government stipends at home and abroad. After the announcement, the King tweeted (in Arabic), “Dear people: You deserve more and whatever I do will not be able to give you what you deserve.”
The cash is having an immediate impact on the Saudi economy.
According to Vice News, many Saudis “have celebrated the move by splashing out on luxury items such as jewelry, iPads, flat screen televisions, and vacations. One man even expressed his happiness at the handout by posting a video to YouTube in which he showers his bemused-looking infant with crisp Saudi riyal bills.”
Saudi gold investments are up 20% so far in 2015, and it seems likely that this increase is directly tied with newly liquid Saudis. CNBC confirms that the spending has caused a “gold-buying boom.”
A local airport shows appreciation for King Salman by placing his portrait on smaller planes.
“There are more people than we can even manage to serve,” a store owner told CNBC in Riyadh, noting that the malls and souks were far busier than a normal weekday.
Writing for Ashmore Investment as published here on SUSTG.com, contributor John Sfakianakis estimated new spending announced by King Salman at $32.3 billion, with 80% of that as current spending and $5.3 billion in capital expenditure over several years. The figure noted that this new expenditure comprises 4.4% of estimated Saudi GDP at $732 billion.
“The majority of the measures are consumption-driven and would have a direct one-off impact,” writes John Sfakianakis, Director of Emerging Markets for the GCC for Ashmore. “The payments are expected to be made over the course of the next four weeks. Such measures are not atypical at the outset of a new monarch’s tenure. They are considered good politics and always positively received by society as a gesture of goodwill by the new monarch.”
Not only Saudis can benefit from the generocity of Saudi Arabia’s new King. In this Bloomberg video, Borderfree CEO Michael DeSimone explains how firms can benefit from Saudi King Salman’s decree.
