Saudi Arabia News: Economy Heads for Worst Contraction in Decades - Bloomberg:
The meltdown in oil markets is turning back the economic clock for Saudi Arabia, putting it on track for the deepest contraction in two decades.
Already under lockdown to contain the spread of the coronavirus pandemic, the world’s largest crude exporter is bracing for a second impact from the oil rout and unprecedented production cuts negotiated by OPEC and its allies. Both will slash government revenue, and in turn derail a fragile economic recovery. Brent crude traded at under $19 a barrel on Tuesday -- a quarter of the level Saudi Arabia needs to balance its budget -- leaving officials with limited options to offset economic pain without crippling public finances.
“This has changed everything,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “So much of the recent recovery was based on the fact that the oil price had been above $50-$60, providing support to economic activity, and that’s just been decimated.”
The meltdown in oil markets is turning back the economic clock for Saudi Arabia, putting it on track for the deepest contraction in two decades.
Already under lockdown to contain the spread of the coronavirus pandemic, the world’s largest crude exporter is bracing for a second impact from the oil rout and unprecedented production cuts negotiated by OPEC and its allies. Both will slash government revenue, and in turn derail a fragile economic recovery. Brent crude traded at under $19 a barrel on Tuesday -- a quarter of the level Saudi Arabia needs to balance its budget -- leaving officials with limited options to offset economic pain without crippling public finances.
“This has changed everything,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “So much of the recent recovery was based on the fact that the oil price had been above $50-$60, providing support to economic activity, and that’s just been decimated.”
The setback presents difficult choices for Crown Prince Mohammed bin Salman. After the last oil price slump, from 2014 to 2016, he announced a major economic transformation plan. While officials have made significant progress -- developing fledging sectors like entertainment and lifting non-oil revenue with taxes and fees -- the economy still hinges on crude. Now the price shock is threatening many of the government’s gains, making it difficult to fund projects and investments when over 60% of revenue this year was meant to come from oil.
No comments:
Post a Comment