| SAUDI OPTIMISTIC ABOUT ITS ECONOMIC FUTURE |
Like the rest of the world, Saudi Arabia’s economy was impacted by the coronavirus pandemic in the first quarter of the year, but the downturn was not as severe as in other emerging economies.
The General Authority for Statistics said the country’s non-oil sector expanded 1.6% during the quarter. Within the non-oil sector, the private sector saw a 1.4% increase, while the government sector rose 1.9%, according to the latest data.
“In the first quarter of 2020, Wholesale and Retail Trade, Restaurants and Hotels recorded the largest growth rate, 4.8%, followed by Other Mining and Quarrying with 4.6%, and Transport, Storage, and Communication with 4.1%,” according to the survey.
On the other hand, Petroleum Refining contracted the most, declining 24.2%, followed by Crude Petroleum and Natural Gas with a 2.9% drop, and Manufacturing excluding Petroleum Refining contracting 2.6%.
Overall, however, GDP at constant prices fell 1% during the first quarter to reach SAR 654 billion, compared to a 1.7% growth during the same period last year.
The decline was primarily due to lower crude oil prices, which led to the oil sector falling 4.6%.
Gross domestic demand during the first quarter rose 1.4% on the back of increase in private and government consumption. Private consumption reached SAR 289 billion (up 1.5%), and government consumption rose to SAR 167.3 billion (up 10.4%), while gross capital formation, which measures investments in the economy, fell 5.4% to SAR 192.9 billion.
“Exports amounted to SAR 216.1 billion in the first quarter of 2020, down by 20.2% from the same quarter of the previous year, mainly due to the fall in oil exports by 21.9%,” GStat noted in the report. “Imports amounted to SAR 169.8 billion, decreasing by 11.9% from the same quarter of the previous year, mainly due to the decline in imports of services by 27.4%.”
Current account surplus amounted to SAR 18.8 billion, or 2.7% of GDP in the first quarter, compared to 7.2% during the same period last year.
GDP per capita fell 5.7% to SAR 19,981, compared to the same period last year.
Meanwhile, inflation rate stood at 1.1% in May, as against 1.3% in April, Saudi Arabian Monetary Authority data shows.
Inflation would likely climb higher as the value added tax rate was increased to 15% from 5%, starting 1 July.
BUSINESSES REMAIN RESILIENT: SURVEY
The global economy continues to feel the effects of the coronavirus, but companies remain resilient and are finding ways to navigate through the crisis.
A new HSBC global survey shows three out of four companies said they were strongly impacted by the crisis, with firms in automotive, wholesale and retail sectors reporting the most severe impact.
The survey of 2,600 businesses in 14 markets between late April and early May shows the crisis is testing the business community’s resolve. But it also reveals tremendous resilience with 63% reporting that they were continuing operations with major or minor changes.
“Around half have moved more of their business online (51%). And more than a third of businesses are finding new solutions through other means,” the survey said.
“On balance, these findings are better than feared given the speed and severity of the shock, coupled with a negative outlook for global growth. HSBC forecasts global GDP to contract by 4.8% in 2020.”
But businesses are faced with a number of questions that require new solutions. The HSBC survey shows 38% of companies surveyed said they were looking to change their production facilities or office locations and 37% were seeking access to new financing. Just over a third were reviewing their products and services and a similar number was eyeing access to key trading markets. Around 31% were concerned about delivery and shipment of their products and services, and close to 31% were worried about availability of materials.
There has also been a camaraderie within the global supply chain, with 80% of companies surveyed saying they ‘feel closer’ to their strategic and supply chain partners and 93% had supported the partners they were working with. Around a quarter each had also supported their partners by collaborating to get products to customers, provided better payment terms to business-to-business customers, offered advice to other companies and shared information with others.
“As two in three businesses seek greater control of their supply chain (67%), they place greater emphasis on supplier resilience. More broadly, they are reconsidering the shape of their entire supply chain – variously pursuing diversification, digitisation and vertical integration,” the HSBC survey stated.
Finally, businesses are looking beyond the crisis and positioning themselves for recovery. When asked, ‘What will be the biggest barriers to your business becoming more resilient over the next six months?’, 62% identified their finances, another 62% the workforce and 37% were focused on technological challenges.
The survey also revealed that businesses felt closer to their customers, employees and suppliers, with 33% of businesses saying employee morale was their biggest barriers and just under a quarter concerned about restoring customer relationships – a remarkable finding given the restrictions in place.
“This may also accelerate the trend of B2B businesses selling directly to consumers, as witnessed by consumer brands offering direct delivery to homes during this crisis.”
Contact SAB
