G20: SAUDI SHOWS HOW TO LEAD IN A CRISIS

As Saudi Arabia assumed the G20 presidency this year, it played a leading role in tackling one of the most difficult challenges facing the global economy.

The kingdom’s year-long presidency culminated in a virtual event in Riyadh on 21 to 22 November, bringing together 19 countries, along with the European Union. These countries were Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, the United Kingdom, and the United States.

This year, Spain, Jordan, Singapore, and Switzerland were also invited as guest countries. A number of multilateral entities such as the International Monetary Fund also attended the annual event.

In the lead up to the Riyadh Summit, the kingdom has presided over a series of ministerial meetings throughout the year that shape the critical policies that would help protect the world against the coronavirus. It also focused on long-term challenges in the areas of agriculture, digital economy, energy, environment, employment, finance, health, tourism, and trade.

The virus has strained government finances across the world and are taking a toll on people’s savings, investments and businesses, apart from the tragic deaths that are now in hundreds of thousands.

While two new separate promising vaccines suggest that there is light at the end of the tunnel, a mass rollout of the vaccines is some time away.

As such G20 states under the kingdom’s presidency have moved swiftly to address challenges facing the more vulnerable economies.

“The Saudi G20 Presidency continues to move forward with its inclusive and bold agenda, in co-operation with G20 countries, in times of crisis. The 2020 G20 Presidency Agenda is committed to advance co-ordinated policy options to progress human wellbeing, a resilient recovery and sustainable future for all by empowering people, safeguarding the planet, and shaping new frontiers,” the G20 said in a joint communique.

The member countries also pledged to support businesses, trade, jobs, and industries, and have overall taken measures in the areas of fiscal and monetary policies and guarantee schemes, to the tune of USD 11 trillion to ensure the financial well-being of the global economy and protection of the global financial systems.

Saudi minister of commerce Dr. Majid bin Abdullah Al-Qassabi notes that the kingdom has spearheaded many initiatives to address the pandemic and reduce its negative impacts.

“In addition to accelerating the recovery process by allocating more than USD 21 billion to support health systems and the search for a safe vaccine for the coronavirus,” the minister told the Saudi Press Agency. “Saudi Arabia has also intensified the co-operation to confront the pandemic with the aim of reviving the economic cycle, reducing the damage facing investors and addressing the vulnerabilities that emerged during the pandemic.”

While Saudi Arabia has an eye on global affairs, it is also creating robust domestic frameworks at home to ensure smooth functioning of the economy and support for the private sector.

In November, The Saudi British Bank (SABB) signed an agreement with the kingdom’s Ministry of Finance to finance the ministry’s supply chain, in collaboration with National Debt Management Center. Two other major Saudi banks signed the agreement with the ministry.

The agreement includes developing a financial tool for the ministry’s cash and liquidity management, aimed at easing government payments to private sector suppliers.

“We are delighted to have the opportunity to play a leading role in developing the kingdom’s financial sector. As a stronger, merged bank, we promise to work harder than ever to create more growth opportunities for the kingdom,” said David Dew, SABB’s managing director, noting that the government and banks are fast tracking the kingdom’s financial development.

“Everybody wins when we collaborate to make doing business in the kingdom easier - and the new Supply Chain Financing Agreement is a great example of that,” Dew said.

Saudi Arabia’s gross domestic product in the third quarter fell 4.2%, according to a flash estimate by the General Authority for Statistics and Information, but that was to be expected as across the world, governments are focused on fighting the virus and saving people’s lives.

The Saudi economy had declined 7% in the second quarter.

Despite the short-term blips, the minister of investment Eng. Khalid bin Abdulaziz Al-Falih, noted that Saudi Arabia will persist with its plans to diversify the economy, create jobs and proceed with a number of large-scale projects and initiative that will reshape the economy in line with Vision 2030.

The minister also said the kingdom is investing “in the fields of industry, health, biotechnology and pharmaceutical industries, expressing his optimism about the future of investment in the kingdom, despite the global decline in its rates, especially since economic reforms, empowering youth and establishing special economic zones will help the kingdom recover from the impacts of the pandemic.”

Saudi’s outlook should also improve as oil prices have rallied on the back of vaccine announcements, and demand in key oil consumers such as China and India is returning to normal levels.

Fitch Ratings, which affirmed the kingdom’s A rating, expects the country’s fiscal deficit to narrow gradually to about 8% of GDP in 2021 and 5% of GDP in 2022, assuming Brent oil price recovers to an average of USD 50 per barrel by 2022 and growth in the kingdom's crude oil production stands to 9.7 million bpd by 2022.

“The full-year effect of this year's VAT rate increase, the expiration of coronavirus-related spending and recovery in the non-oil economy will help narrow the fiscal deficits in 2021-2022,” the ratings agency said.