| REFORMS KEY TO LURING NEW INVESTORS TO SAUDI |
The Saudi government is targeting gross domestic product (GDP) of 2.6% this year with a robust, expansionary budget that aims to stimulate the economy through higher capital expenditure, and the development of a feasible environment to encourage the private sector and foreign investors to expand their business.
The Ministry of Finance’s 2019 budget statement noted that improvements in the business climate and increased investment opportunities are expected to allow for increased private sector participation and accelerated growth in the kingdom
Reform initiatives include promoting investments, boosting investors’ confidence, privatisation programmes, directing capital spending to vital projects based on economic return, private sector stimulus packages and developing new economic sectors and activities,” said the ministry.
In addition, the Public Investment Fund (PIF) is expected to play a vital role in driving economic development, and improving the management and development of the kingdom’s assets in the medium and long term.
The GDP expansion in 2019 would be a strong acceleration from 2018, which has so far seen GDP growth of 1.4% in the first six months, with non-oil sector increasing by 2% and the oil sector by 1%. The ministry, however, expects the second half of 2018 to grow at a faster clip to take the annual GDP growth for the year to 2.3%.
During the first half of 2018, the current account of the balance of payments recorded a surplus of SAR 107.1 billion, while reserve assets at the Saudi Arabian Monetary Authority (SAMA) increased by SAR 40.4 billion up to the third quarter of 2018,” the ministry said. “The positive performance in the balance of payments is expected to continue.”
Meanwhile, inflation registered an average increase of 2.5% by the end of October 2018, compared to a decline of 0.7% on average for the same period in 2017.
Non-oil real GDP was the key growth driver in the first half, with manufacturing sector experiencing real growth of 5.3%, and mining and other quarrying activities rising 4.4% during the same period.
Other key sectors, such as financial, insurance, real estate and business, posted a 3.2% growth for the first half of 2018. Government services expanded 4.1% over the same period. However, other non-oil sectors declined during the period, with construction falling 2.8%, transport, storage and IT shrinking by 1%, and the wholesale and retail trade, restaurants and hotels contracting by 0.5%.
SEVEN-POINT PLAN WITH THE UAE
Saudi Arabia is also forging closer economic ties with its key allies. In January, the Executive Committee of the Saudi-Emirati Coordination Council met to establish a joint vision of economic, social and military integration between the two countries, and outlined seven key initiatives
The first was the Saudi-Emirati cryptocurrency pilot project to be deployed by banks on an experimental phase. This will harness the applications of blockchain technology and facilitate cross-border payments. The project will also determine the impact of a central currency on monetary policies.
The second initiative will see the two countries facilitate cross-border trade for 81 key firms to ensure smooth operations between customs and commercial establishments. As many as 41 Saudi companies will be provided this facility, along with 40 Emirati entities. The Authorised Economic Operator initiative will facilitate the flow of traffic at the entry ports between both countries and at customs outlets.
The third major initiative is a joint platform to support small and medium enterprises (SMEs), which will allow registered Saudi and UAE SMEs to compete on federal government procurements.
The fourth initiatives is the promotion of financial literary and development of a Financial Awareness Programme for Children, which will teach basic financial concepts to people between seven and 18 years old. The programme will focus on personal finance, while also nurturing a culture of entrepreneurship through training courses.
The fifth initiative is a joint exercise to test the readiness of the two countries’ supply chains in times of crisis or natural disasters.
The joint exercise will contribute to building a mechanism for direct communication and control of risks between the relevant units in both countries during emergency times, as well as the sharing of expertise, knowledge and experience on supply chain security and risk management," the two countries said.
Sixth, Saudi Arabia and the UAE will work to ensure that their airports are disable-friendly and cater to the needs of travellers that require special assistance. The initiative will standardise travel procedures, regulations, and ensure training of airport crew.
Finally, a landmark development will see a Saudi-Emirati civil aviation common market. The joint plan will lay the groundwork for a comprehensive integration and co-operation in civil aviation in key areas, such as air navigation, safety and security, and investigation of air accidents.
The seven initiatives are expected to be part of the overarching agreement to forge closer trade, civil, defence and social ties between the region’s two largest and most dynamic economies.
Contact SAB
