Saudi Arabia is struggling to live a”double blow”
Since the first new case of new pneumonia was diagnosed in Saudi Arabia on March 2, the epidemic situation has been spreading rapidly. It has become the country with the largest number of confirmed infections in the Middle East except Iran, and the prevention and control situation is grim.
In order to curb the epidemic, the Saudi government has adopted strict prevention and control measures, which has slowed the spread of the virus to a certain extent, but measures such as curfews and personnel movement control have affected non-petroleum economic activities such as services and tourism. Had a profound impact. At the same time, the international oil price plummeted due to the sharp drop in international oil demand and the price war, which caused a huge impact on Saudi Arabia, which is heavily dependent on oil revenue.
On June 23, two women wore masks to exercise in a gym at Riyadh. (Agence France-Presse)
Significantly reduce the size of the Mecca Hajj
The data released by the Ministry of Health of Saudi Arabia on July 13 showed that there were 235111 confirmed cases, 169842 cured cases and 2243 deaths in the country’s new coronary pneumonia. In the past 24 hours, 2852 cases, 2704 cases and 20 cases were newly added.
Compared with the number of cases that continued to grow at a high level in June, the outbreak in Saudi Arabia has recently shown signs of easing. After three or four thousand new cases per day for more than a month, starting from July 11, the number of new cases per day in Saudi Arabia dropped to below 3,000. The 20 new deaths reported by Saudi Arabia on the 13th were the lowest in recent years. In the past two weeks, the number of new deaths per day in the country was between 30 and 56.
Saudi Arabia’s Ministry of Health stated that the rate of severe cases of new coronary pneumonia in the country is stabilizing and has declined in the past two weeks as new cases in Saudi Arabia continue to decrease.
At the end of this month, Saudi Arabia is about to usher in the annual Hajj pilgrimage. After Saudi Arabia announced its suspension of the deputy dynasty at the end of February, as the epidemic has accelerated, the outside world has been speculating whether Saudi Arabia will cancel this year’s dynasty. Islam stipulates that every adult Muslim with financial ability and physical strength should visit Hajj at least once in his life. The Islamic dynasty is from 8 to 12 December each year and is called the dynasty at other times. The Saudi Foreign Ministry issued a statement on June 22 stating that this year’s Hajj will be open only to Muslims of all nationalities who are already “in a very limited number” and already reside in Saudi Arabia.
Saudi Hajj Minister Mohammed Benting revealed on June 23 that the number of Hajj pilgrimages in Mecca will be controlled at around 1,000 this year, and Muslims outside Saudi Arabia cannot come to Hajj without exception. In contrast, in 2019, about 2.5 million Muslims went to Mecca to participate in the annual Hajj, of which more than 1.8 million came from outside Saudi Arabia.
The Director General of the World Health Organization Tan Desai expressed support for Saudi Arabia’s decision to limit the number of Hajj this year. He said this reflects the difficult choices that all countries must make to put health and safety first.
The”2030 Vision” reform plan was blocked
In the face of the new crown epidemic, the Saudi government quickly took measures including cancellation of flights, suspension of work and suspension of school, closure of city curfew, Suspend deputy dynasty, etc. Anti-epidemic measures have weakened non-petroleum economic activities, and low oil prices have severely reduced fiscal revenue. Saudi Arabia’s vigorously implemented “2030 Vision” reform plan to reduce oil dependence and develop a diversified economy in recent years is now facing multiple obstacles.
The International Monetary Fund (IMF) report released on June 24 shows that Saudi Arabia’s GDP this year (GDP) will shrink by 6.8%, much higher than its 2.3%contraction rate forecast in April.
According to data released by the Saudi National Bureau of Statistics on June 30, Saudi Arabia’s GDP shrank by 1%year-on-year in the first quarter of this year, the non-oil industry’s growth rate in the first quarter was 1.6%, and the oil sector’s growth rate was- 4.6%. The head of the Saudi Monetary Authority, Ahmed Hulifi, said that Saudi Arabia’s second-quarter data “will not improve,” but he emphasized that Saudi Arabia’s full-year economic performance expectations are not as pessimistic as the IMF’s.
Saudi Arabia’s Minister of Finance Mohammed Jadan said earlier that the economies of other countries in the world are also facing the same challenges, but for Saudi Arabia, the crisis is more serious because it and the decline in global demand impact oil revenues At the same time, the double blow of weak economic growth and declining oil revenue made Saudi Arabia inevitably need to take decisive and rapid action.
Jia Dan warned that in order to cope with the adverse effects of the epidemic and the superposition of oil prices, the government will have to resort to”painful” and”violent” measures.
Fiscal policy is facing a dilemma
On May 11, Jia Dan said in a statement issued by the Ministry of Finance that in order to boost the economy, Saudi Arabia From June, the distribution of the cost of living allowance for government civilians and military personnel will be stopped, and the VAT rate will be increased from 5%to 15%from July. In addition, Saudi Arabia has cancelled or suspended some capital expenditure projects, including several projects planned for the”2030 Vision” reform.
Jia Dan emphasized that although the government has issued a package of emergency financial and economic policies with a total amount of about 100 billion rials (about 188 billion yuan), at present, this policy is not enough to fully respond to the epidemic. The severe challenges posed, so the government should further reduce expenditures and take measures to maintain and stabilize non-oil revenue.
Analysts believe that the Saudi government hopes to increase non-oil revenues, ordered a substantial increase in value-added tax, abolished subsistence allowances, and people’s purchasing power has dropped significantly, which is likely to inhibit consumer spending and slow economic growth.
A recent article published by the Economic and Commercial Section of the Chinese Embassy in Saudi Arabia stated that the economic and financial situation of Saudi Arabia in the second half of the year is difficult to be optimistic. Fiscal policy is facing the dilemma of”stabilizing the economy” and”securing the fiscal” Looking at the recently announced policies, the government seems to have chosen the conservative route and is more interested in maintaining the long-term goal of fiscal balance. Enterprises and residents should have reasonable psychological expectations of austerity policies. The impact of the new policy on economic recovery, business environment and social expectations should not be underestimated.