Coronavirus: Saudi Arabia’s economy shows strengths despite COVID-19, say experts

Saudi Arabia’s economy was negatively impacted by the COVID-19 pandemic, but experts voiced their optimism and highlighted the silver linings throughout the nearly three-month-old crisis on Monday.

As was the case worldwide, Saudi Arabia saw its economy dip due to the lockdown and social distancing enforced in order to protect its citizens and those residing in the country.

And despite the supply and demand taking a nosedive, the Saudi government pumped money into the economy and issued circulars in order to help the private sector, including small and medium enterprises.

Ammar Alkhudairy, the chairman of Samba Financial Group, commended a decision by the Saudi government to allow SMEs to restructure loans and debt while waving restructuring fees traditionally charged to clients and companies. “A lot of the subsidies [from the government] were to cover the cost for banks of not charging … restructuring fees,” Alkhudairy said during a webinar held by the Communication & Financial Knowledge Center.

But he pointed out that different methods were needed for different economic and financial difficulties facing the public and private sectors. “This is such a big crisis that what the government did … is great,” he said. Nevertheless, he believes the economic impacts of the COVID-19 pandemic will be felt for the next year or two.

For Abdulaziz Alrasheed, Assistant Minister at the Ministry of Finance, the challenges that were and continue to be present in front of the Saudi government’s Vision 2030 are to ensure citizens get the services they need. The government has had to reprioritize things such as the health sector in order to ensure the necessary funds for this and the wellbeing of its residents and citizens, he said.

“The Saudi economy, since Vision 2030 was launched, aims to strengthen the national currency – that counts on oil exports – and to strengthen the export of local products. This needs a long time,” Alrasheed said during the webinar, “Enabling the Saudi Economic Ecosystem in Response to the COVID-19 Pandemic.”

Alrasheed gave the example of the recently-formed Ministry of Industry, which displays the focus of the government to make this one of the main points of growth in the future.

Yet, the economic impact has been global and Saudi Arabia looked to help other nations as well. As the head of this year’s G20, the kingdom’s finance minister Mohammed al-Jadaan announced in April that the group would freeze principal repayments and interests payments for the world’s poorest countries.

This move, al-Jadaan said, would allow more than $20 billion for these poorest countries to use on health systems and the COVID-19 battle.

“Saudi Arabia showed that it could lead during this period,” Fahad Aldossari, deputy governor of the Saudi Arabian Monetary Agency (SAMA), said during the webinar.

Oil prices hurt Saudi Arabia, private sector way forward

Aldossari also touched on the private sector in Saudi Arabia, saying that it was and would continue to be one of the most effected by the current economic crisis.

The oil market was a main factor in the economic difficulties that Saudi Arabia faced in recent months as a result of the pandemic. This was exacerbated by the US-China tensions and Brexit months before, Ayman Afghani said Monday.

Afghani, deputy minister of Ministry of Economy and Planning (MEP), admitted oil prices and the dip in demand “directly hurt” the kingdom’s economy. But recent developments are showing positive signs, he said, such as the improved Purchasing Manager Index and improved jobs report in the US last week.

Now, Afghani says, the focus should be on the private sector and infrastructure. “We should learn that investment in basic infrastructure is not secondary, rather primary.”

“Focus should be on private sector after corona and to focus on opportunities. Private sector will create competitiveness and would use government to solve any issues. We should learn that investment in basic infrastructure is not secondary. It is primary,” he said.

Perhaps one of the more vocal panelists was Mohammed Abunayyan, the chairman at ACWA Power. Abunayyan, like the other panelists, pointed out that Saudi Arabia’s economy is tied to the global economy and not immune from what is taking place. “The inability to move and go places has hurt – almost 70 days,” he said.

He hailed the decisions of the government to try to help SMEs but noted that the government should focus more on SMEs “because economies don’t just work on big companies – [SMEs] are the primary focus of an economy.”

Abunayyan called for more coordination between the government and the private sector while also echoing Afghani’s call for focusing on a productive local sector.

“The private sector in Saudi Arabia is dynamic and has a lot of potential. We need to focus on employing our children [of Saudi Arabia],” he said. “We have a strong economy and we maintained our ratings while many other countries went down [after the outbreak of COVID-19.”