COVID - 19 Saudi Arabia

Impact of COVID-19 Pandemic in Saudi Arabia

Global Economic Impact of Coronavirus Pandemic

  • COVID-19 which originated in China late 2019, has infected more than 1.3 million people worldwide.
  • Most recent data suggests that the economic impact of the pandemic will be comparable to 2008 – 09 economic crisis or even worse.
  • Share markets have taken a hit globally.
  • Unemployment rates have shown great rise. International Labour Organisation warns of 25 million layoffs.
  • More than 100 countries have imposed travel ban.
  • Almost every sector has been hit and fitch forecasts a decline of 2% in global GDP.
  • "ICAEW states that oil sector is expected to boost GDP of KSA by 3.8% despite decline in growth of non-oil sectors."
  • Share markets have taken a hit globally.
  • Unemployment rates have shown great rise. International Labour Organisation warns of 25 million layoffs.
  • More than 100 countries have imposed travel ban.
  • Almost every sector has been hit and fitch forecasts a decline of 2% in global GDP.
  • "ICAEW states that oil sector is expected to boost GDP of KSA by 3.8% despite decline in growth of non-oil sectors."

Economic Impact on Oil Sector of KSA

  • Oil prices fell from $73 per barrel on January 3, 2020 to $27 per barrel in March 2020 due to ongoing supply war between KSA and Russia. This has affected fiscal plans across the middle east region.
  • Pandemic is affecting global oil demand significantly with forecasts showing decline in demand by 700,000 barrels a day in Q1, 2020 .
  • KSA and other countries are planning to increase oil production which is leading to rare combination of increasing supply and decreasing demand.
  • Brent price forecasts shows average of $40 a barrel for 2020 with downside risk.
  • "Saudi Aramco is better positioned to survive low oil prices due to lower production costs. KSA plans to increase oil production to 11.5 million barrels a day from under 10 million in recent months which will largely contribute to economic growth. Ports and customs in the country are not affected by pandemic."
  • " Oil industry is not immune to impact of COVID-19 on oil field workers. KSA government is likely to absorb labor market entrants owing to layoffs in private sector."
  • Pandemic is affecting global oil demand significantly with forecasts showing decline in demand by 700,000 barrels a day in Q1, 2020 .
  • KSA and other countries are planning to increase oil production which is leading to rare combination of increasing supply and decreasing demand.
  • Brent price forecasts shows average of $40 a barrel for 2020 with downside risk.
  • "Saudi Aramco is better positioned to survive low oil prices due to lower production costs. KSA plans to increase oil production to 11.5 million barrels a day from under 10 million in recent months which will largely contribute to economic growth. Ports and customs in the country are not affected by pandemic."
  • " Oil industry is not immune to impact of COVID-19 on oil field workers. KSA government is likely to absorb labor market entrants owing to layoffs in private sector."

Economic Impact on Non-Oil Sectors of KSA

  • Effect of pandemic is undermining KSA’s effort of diversification by the inclusion of non-oil sectors in the economy .
  • Temporary restrictions on international travel, events, market centers and many industries will lead to decline in growth of non-oil sectors to 0.7% from 2.8% respectively .
  • Travel & Tourism which is major revenue generating non-oil sector is among the worst hit. Government has banned unnecessary travel to Mecca.
  • Congestion levels in Riyadh and Jeddah are at record low which is largely affecting real estate sector.
  • Growth in Healthcare and Essential goods will be seen.
  • According to Mckinsey’s survey majority of the household report decrease in income which is affecting retail sector.
  • SAMA has reduced lending rates by 50 basis points to encourage consumer spending and facilitate SMEs. Consumer finance will see a shift towards cashless.
  • "KSA government has announced stimulus package of SAR 120 billion for private sector aimed at reducing impact of pandemic and stimulate growth and employment in non-oil sectors of the economy."
  • Travel & Tourism which is major revenue generating non-oil sector is among the worst hit. Government has banned unnecessary travel to Mecca.
  • Congestion levels in Riyadh and Jeddah are at record low which is largely affecting real estate sector.
  • Growth in Healthcare and Essential goods will be seen.
  • CAccording to Mckinsey’s survey majority of the household report decrease in income which is affecting retail sector.
  • SAMA has reduced lending rates by 50 basis points to encourage consumer spending and facilitate SMEs. Consumer finance will see a shift towards cashless.
  • "KSA government has announced stimulus package of SAR 120 billion for private sector aimed at reducing impact of pandemic and stimulate growth and employment in non-oil sectors of the economy."
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