According to the recently released central bank data, the kingdom’s economy struggles due to Saudi consumers spending less money.
As cash withdrawals dropped by 8 per cent in February and the government decided to cut spendings, Saudi economy is struggling to grow. A Bloomberg survey estimates that the economic growth for this year will not exceed 1.5 per cent, which translates into the slowest rate in the last 7 years.
Simon Kitchen, head of macro-strategy at EFG-Hermes investment bank, commented on the matter:
“The data reflect weaker consumer confidence. Oil prices remain low, in spite of the February-March recovery, and disposable incomes have been under pressure this year. A recovery in consumer sentiment is unlikely in 2016.”
Moreover, point-of-sale transactions measuring economy related consumer’s confidence also decreased by 9 per cent to 15.2 billion riyals ($4.1 billion) in 2016.
In an attempt to counteract the budget deficit for 2015 (which had reached a concerning rate of 15 per cent of the kingdom’s GDP), local authorities have raised energy prices.
Oil prices, though, experienced an abrupt drop, from $111 a barrel at the end of 2013 to $40.01 a barrel last week. Oil exports account for around 70 per cent of the Saudi government’s total revenue.