| SAUDI TAKES MEASURES TO ENSURE NON-OIL SECTOR REBOUNDS |
As the impact of coronavirus deepens, Saudi Arabia has taken additional measures to provide financial help to the private sector.
A number of countries across the world have rolled out stimulus packages, and recalibrated their monetary and fiscal policies to ensure businesses can survive the downturn brought about by the coronavirus disease.
The Saudi authorities have also announced new initiatives valued at SAR 70 billion that target the private sector, especially small businesses, to helpthem ride out the storm and protect jobs.
A key component of the package is the undertaking by the Saudi government to bear 60% of the salaries of the Saudi private sector at a cost of SAR 9 billion, via its existing SANED programme.
Companies that wish to benefit from the SANED social insurance system should submit their applications through the General Organization for Social Insurance (GOSI) portal www.gosi.gov.sa.
“In a statement, the GOSI said that the entitlement will be from the month following the month in which the subscriber submitted for the payment request, pointing out that the deadline for receiving the payment requests will be according to the date that the enterprise submits the request,” according to the Saudi Press Agency.
FURTHER ASSISTANCE
Other key measures include allocating around SAR 50 billion to expedite due payments of the private sector, according to the Ministry of Finance. In addition, the Saudi government would discount electricity bills for consumers in commercial, industrial and agricultural sectors for a period of two months (April and May) by around 30%, with the possibility of extension, if needed.
Another option provided to the industrial and commercial sector is to cut electricity bills for the months of April, May and June by 50%, with the remaining dues collected in equal instalments for a period of six months starting from January 2021, with the caveat that they could be postponed further. The two measures will have a budget of SAR 900 million.
The government will also provide a minimum salary to individuals working with the Public Transport Authority.
In addition, the Saudi Cabinet has moved swiftly to require companies that are majority state-owned to give preference to local content and small and medium enterprises, which will increase economic momentum and create demand for domestic products and services.
The initiatives are essential to preserve the country’s economy and ensure that the recovery is not disrupted by lack of labour availability. The Saudi authorities’ move to pay a portion of private sector wages may turn out to be the most consequential as it would allow companies to hit the ground running to take advantage of pent-up demand.
These measures come in addition to the Saudi Arabian Monetary Authority SAR 50 billion stimulus package, aimed at supporting the economy.
RATINGS AGENCIES
In March, S&P Global affirmed Saudi Arabia’s sovereign credit ratings at ‘A-/A-2’ with a stable outlook, noting that the kingdom’s strong net asset-stock position on its fiscal and external balances continues to be a key ratings support.
Fitch Ratings also affirmed Saudi Arabia’s A ratings with stable outlook.
“We expect the government budget deficit to spike to about 12% of GDP in 2020 (roughly USD 80 billion), from 4.5% of GDP in 2019,” Fitch said in a report in April. “We expect that oil revenue will be down 41% assuming an average oil price of USD35/bbl and average production of 11.5 million barrels/day. We expect non-oil revenue to be down 15% as a result of the coronavirus pandemic.”
The government recently raised its debt ceiling to 50% from 30% of GDP, and Fitch forecasts Saudi debt at about 36% of GDP by 2021, from 23% of GDP in 2019. Last month, the Ministry of Finance said it had raised SAR-denominated sukuk in three tranches with a combined value of SAR 15.57 billion.
Latest forecast from the International Monetary Fund projects Saudi economy to contract 2.3% this year, on account of the coronavirus lockdown, which has frozen the global economy. Oil GDP will remain flat, with non-oil contracting 4%. However, the kingdom’s economy will fare better than regional MENA exporters, which will see a 4.2% contraction this year.
The domestic economy is expected to make a strong recovery next year, rising 2.9%, with both oil GDP (3.3% increase) and non-oil GDP (up 2.7%) contributing to the growth, the IMF projects.
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