Saudi Arabia tethers its currency to the dollar and tends to move in lockstep with the US Federal Reserve. Although pressure intensified earlier this year with the collapse in crude prices, 12-month dollar-forwards for the Saudi riyal have since stabilized.
Fiscal tightening
Goldman said the government’s fiscal plans will likely help the current account return to surplus next year and ensure that in the medium term foreign-exchange reserve steady at slightly over 80% of the narrow money measure, M1.
But “the sharp decline in projected expenditure penciled in over the next three years will depress non-oil economic growth,” Soussa said, forecasting it will average 1.2% year-on-year during that period, compared with trend growth of 2.5%.
“This will result in a widening gap with the pre-Covid trend level of non-oil economic output,” Soussa said.
“As Vision 2030 spells out in detail, growing and diversifying the economy and increasing employment will require sustained efforts on the reform front in parallel with government investment,” Soussa said. “In a low oil price environment, where spending is constrained, this becomes even more the case.”
Original news source Credit: gulfnews.com
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