Economic updates
Our in-depth, independent reports cover the macroeconomic environment, the Saudi government’s annual budget, and Saudi Arabia’s monetary and financial developments, labor market, and inflation.
Fiscal Balance Program 2020: The Path to Fiscal Sustainability
Macroeconomic reportAlong with the 2017 budget statement, the government announced details of the Fiscal Balance Program (FBP 2020), one of the programs highlighted in Vision 2030. The FBP contains all reforms relevant to reaching a balanced budget by 2020 and includes initiatives designated for enhancing spending efficiency, reforming energy prices, and promoting non-oil revenue. The FBP also touches on critical socioeconomic aspects, such as the creation of a “Household Allowance Program”, and the announcement of more detailed plans to support private sector economic activity.
The Saudi Parallel Market (Nomu)
Although Saudi Arabia is the first country in the Gulf region to launch a parallel market, such markets have existed since the 1970s in many mature economies - US NASDAQ and the UKs FTSE AIM are perhaps the best examples. That said, replicating the success of some of the more established parallel markets will not be easy. Jadwa Investments latest report takes a closer look at the Parallel Market and its impact on the Saudi economy.
Petrochemicals and the Vision 2030
The Saudi petrochemical industry is vital to the Kingdoms non-oil economy with chemical and plastic exports comprising a substantial 60 percent share of total non-oil exports. As a result, the sector has been identified by both the National Transformation Program (NTP) 2020 and Vision 2030 to help lead the push away from fossil fuel reliance. But this restructuring of the sector comes at a time when it is already facing up to a number of challenges, both at home and abroad. Besides seeing a drop in global chemical prices in the last two years, the sector has also seen domestic feedstock prices being raised in 2016, with further rises expected in 2020. In addition, global competition is set to intensify, especially from the US and China, where significant rises in petrochemical capacity are expected in the next few years.
The Saudi Economy in 2017
Macroeconomic reportWe expect the Saudi economy to continue slowing in 2017, dragged down by negative growth in the oil sector. Non-oil sector growth should rebound but remain subdued. As oil prices rebound, the current account deficit will shrink considerably, while the fiscal deficit will fall to single digits. We believe the government will continue to comply with targets specified in the Fiscal Balance Program (FBP 2020), allowing for a smooth adjustment in the fiscal budget while cushioning the impact on growth in the non-oil private sector.
