Saudi Arabia’s Vision 2030 faces its biggest test
The Gulf’s largest economy is facing unprecedented challenges from the coronavirus Covid-19 and oil at $30 a barrel. Has diversification under Vision 2030 done enough to help Saudi Arabia weather the storm or will it be forced to abandon its dreams of diversification?
Saudi Arabia has announced SAR120 billion ($32 billion) of stimulus to support its economy as it looks to fight Covid-19, but the impact of lower oil prices means it is also having to announce emergency spending cuts and increase its deficits to pay for them.
Minister of finance Mohammed Al-Jadaan unveiled on Friday SAR70 billion of new initiatives to help the private sector, in particularly SMEs, taking the official response stimulus up to SAR120 billion.
However, Saudi Arabia has also been hurt by the fall in oil prices to below $30 a barrel, squeezing the financial resources available and forcing the Kingdom to announce a SAR50 billion reduction in expenditure, as well as a reorientation of spending to fight the virus.
Already running a fiscal deficit, Al-Jadaan said Saudi would increase borrowing to fund the plan, raising the question of how much it will put aside to continue supporting Vision 2030.
Al-Jadaan announced a “partial reduction on spending in some items with the least social and economic impact”, while the government re-focuses its financial firepower to implement measures to fight the consequences and spread of the virus.