Saudi Arabia has emerged as a new growth spot in the Middle East with Crown Prince Muhammed bin Salman’s market reforms and ambitious projects.
While these high-profile projects are a high-risk game, Saudi Arabia is also betting on a low-risk consumer-based economy that can drive growth heavily.
A planned distribution of wealth in the country with nationalisation schemes and minimum wages means that the country wants its youth to be the driving force of the economy. And as a country of youth, Saudi’s investment in its youth will boost its non-oil sector growth.
How has Covid-19 affected the country’s economy? At a macro-level, the pandemic has devastated the country’s lifeline, the petroleum industry, and the major form of tourism in Makkah and the port city of Jeddah, the Hajj season.
Having wreaked havoc in these sectors, the pandemic has also affected the ordinary lives of the Saudi families with the higher death rate compared to some of its neighbours.
However, the biggest damage on the financial sector in the kingdom came from the increase in VAT in the country. This has affected us and many other small businesses in the country.
I can understand the government’s fast-paced move to balance the budget spending, but the government should have brought the rise in VAT during the good times. Even with the higher VAT, the economy is still surviving as the projects have slowly restarted once again.
This time around, the growth will be slower and if we can get away with just the one lockdown that brought the country to a halt, I believe the financial year can be ended with a sigh of relief as countries in the West and the East prepare to face a second-wave.
What happens if a second wave comes around? The companies that are unprepared can possibly face the brunt of the pain with many more bound to shut down.
I can foresee a quicker turn to a digital economy with the public closing in on the high standards of life seen in its GCC neighbours such as the UAE. I still think the internet scene in the country in 2020 is quite nascent.
The pandemic creates as many opportunities as challenges. If one can take on the challenge and grow up to take advantage of the opportunity, the sky is the limit. In a quickly developing country like Saudi Arabia, this is especially true with its alluring Vision 2030 programs.
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