The economy of Saudi Arabia is characterised by a number of special features, the most important of which is that it is the biggest economy in the Middle East.
In my opinion, the initial expectations of the Saudi economy in 2017 are optimistic due to several factors, mainly, the improvement in oil prices after the agreement reached between OPEC member states and non-OPEC oil exporting countries, especially Russia.
The signing marks an important milestone that directly resulted in the increase of the oil price to $56 per barrel, with expectations to exceed $60 in the next year. On the outcome, this is a very reassuring factor.
Another important factor is the leadership’s determination to implement the National Transformation Programme that includes the restructuring of many economic sectors.
Proof of the serious will to implement the programme is the latest appointments over leadership positions in critical finance and administration roles. That comes in addition to the issuance of austerity decisions that further assure to transform the economy into an organised structural one. Authorities, such as the General Authority of Zakat and Tax, will also have a key role and will give impetus to find resources for the state treasury department, such as a value-added tax (VAT), seen in the kingdom as an important part of the restructuring process.
Another growth driver is the increasing attention given to other economic sectors, as well as the development of partnerships with world-class partners in major sectors such as energy, gas and mining, among others, which will all contribute to raising the level of economic performance and, most importantly, increasing the role of the private sector by means of privatisation of projects and promoting public-private partnerships.
The private sector is seen to definitely have a major role in re-pumping a portion of the money into projects and bring in more confidence. SMEs are also to contribute, particularly after the establishment of the General Authority of Small and Medium Enterprises to guide and help structure overall businesses.
Although we expect the construction sector will continue to be negatively influenced, hence there must be some initiatives to consolidate this sector. To that end, we foresee the attention will be given more to national-level projects that are built to address housing and education.
We can almost assert that many predicted the worst for the Saudi economy in 2016, but the results were not that bad, although some sectors were affected. If performance were to be measured based on public interest and what is happening in the region and the world around us, we can tell with confidence that the situation has been managed very well and the kingdom keenly overcame this stage, although with a dramatic 70 percent drop in the country’s revenue.
It is interesting that diversity and rationalisation of expenditure have almost become permanent attributes of the Saudi economy today and more of a built-in culture. The government seems to have already gained a better grasp of efficiency and transparency, which, in turn, are expected to encourage more investments and businesses.
Abdullah Al Fozan, Chairman of KPMG in Saudi Arabia and Member of KPMG’s Global Board