| A new expansionary budget, prospects of higher oil prices, stronger non-oil sector growth, and fiscal resilience point to Saudi Arabia being poised for economic growth next year.
Already, green shoots of recovery are sprouting, with the kingdom’s non-oil private sector sentiment showing rapid improvement.
IHS Markit’s September data shows the economy’s continued path to recovery after the coronavirus pandemic lockdown. Indices for output, new business and exports all signalled renewed expansions at the end of the third quarter.
Business activity was supported by a return to sales growth as the economy started to find its footing after the COVID-19 lockdown.
“Despite some businesses continuing to see a drag from ongoing restrictions, most companies saw market conditions improve. In addition, the impact of a rise in VAT notably softened, after a sharp rise in prices and a dip in sales were seen in August. Cost inflation eased to just a marginal pace,” IHS said.
Saudi companies are also reporting a rise in new work from both foreign and domestic clients, while unemployment levels eased amid more work and drop in inventories. They were also optimistic of an increase in output over the coming year.
With global economic indicators such as PMIs, exports and GDP and job growth in the third quarter surpassing expectations in most countries, there is a sense that the global economy is finding a way to handle the pandemic even as it persists.
The International Monetary Fund now expects global growth to decline 4.4% this year, a less severe contraction than its previous forecast in June. The IMF added that global GDP will likely rise 5.2% in 2021.
“Progress with vaccines and treatments, as well as changes in the workplace and by consumers to reduce transmission, may allow activity to return more rapidly to pre-pandemic levels than currently projected, without triggering repeated waves of infection,” the IMF said in its October economic outlook.
Extension of fiscal countermeasures into 2021 could also lift growth above the forecast, which factors in only the measures implemented and announced so far.
With global economic prospects still largely uncertain, the Saudi government is right to focus on developing expansionary project that generate jobs and economic activity. |
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