According to the latest BMI report on Saudi Arabia, despite the oil sectors decline, the rest of the Saudi economy is in good health. The BMI reports the government’s fiscal stimulus package and increasing business confidence as their reasons for optimism.
For example, non-oil growth increased from 0.6 percent year-on-year in Q1 2017 to 2.1 percent in Q3 2017.
The report explains how the Saudi government’s move away from the severe fiscal measures of 2017 will place more money in the hands of the Kingdom’s consumers.
The most recent budget included an increase to the Citizen Account programme, giving more to those of a lower-economic status, as well as a SAR 72 billion stimulus package to the housing sector to support housing construction and fee waivers for small businesses.
Additionally, there were bonuses for civil servants and military servicemen. Although, these measures will be offset by the introduction of 5% VAT and increase of oil prices, up to 50%.
The introduction of reforms, such as the bankruptcy law, to increase business confidence have worked positively. Saudi Arabia’s Purchasing Managers’ Index reached 57.3 in December, its highest level since August 2015.
As the non-oil sector accounts of 55% of the overall economy in Saudi Arabia, any contraction of this sector will affect the overall GDP.