Home Economy Saudi Arabia’s drastic but pragmatic steps to salvage the sinking economy

Saudi Arabia’s drastic but pragmatic steps to salvage the sinking economy

The COVID 19 impacted economies all over the world. An industry that suffered majorly was the travel and tourism sector. A direct consequence was a big shock to the oil market which had shrunk in 2019 itself due to the OPEC policies and the consequent tussle between Russia and Saudi Arabia. In the aftermath of the 2019 oil fiasco, the pandemic made matters worse in 2020 for oil export dependent economies. The Saudi Arabian economy shrank by 7 % in the second quarter of 2020. The kingdom derives approximately 80 percent of its revenues from oil and due to the hit on the oil sector; the unemployment rose by 15.4 percent which is higher than ever recorded. In order to fight the economic challenges, the country introduced several unprecedented reforms.  

In May 2020, the Saudi Arabian government tripled the VAT from 5% to 15% as a measure to help the economy to come out of the economic burden made worse by the lull in the oil prices. The living allowances that the government officials received up until now were taken back. The policies that had been incorporated as a part of the “Vision 2030” were tweaked to aim initially for an economic stability. The benefits and salaries of government entity officials were re-considered. 

In addition to these, the Saudi Minister of Human Resources and Social Development Ahmed Alrajhi tweeted about the introduction of reservation of jobs for Saudi citizens in customer care roles. This, according to him would help generate job opportunities for youth in large numbers. This decision includes all roles that require client facing roles using telephone, email, social media and other modern methods of telecommunications. 

The Finance Minister also announced that foreign companies who desired Saudi Arabian investments were to have their headquarters within the country by 2024. This initiative called “Project HQ” is also aimed at creating permanent job opportunities for the locals. 

These steps have been lauded for the intention to patronize the locals and attempt self sufficiency. Though the current world economic situation can be characterised by crashing sectors, the steps taken by the Saudi government indicate its willingness to rise above this economic turmoil with means other than oil dependency. 

These measures though drastic are pragmatic measures taken as the pandemic continues to curtail travel industry. The oil sector thus will take time to rise again. Hence, the Ministry of Human Resources and Social Development in collaboration with the Human Resources Development Fund in the country plans to offer programmes to train and support youth to match the standards of the customer care centres. E-training platforms like Doroob, summer training platform like Saifi and other such portals will help in the process. 

Saudi Arabia expects a 3.2 % growth in the GDP in the year 2021 which is 5 % as against the projected 3.7% for the year 2020. The evident dynamism in creation of resources for the population will ensure that the people of the country reap the majority of the benefits coming from foreign investments.