Corona pushes the Saudi private sector into the largest contraction

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IHS Market’s purchasing managers ’index fell in March to 42.4 points, compared to 52.5 points in February, the biggest drop since the index’s measurement in the kingdom began in August 2009, according to data reported by Reuters today. Sunday.

A drop below 50 points indicates deflation. On April 2, Saudi Arabia recorded 1885 cases of HIV and 21 deaths, the highest level among the six Gulf Cooperation Council states.

In order to contain the spread of the virus, the Kingdom imposed escalating social restrictions, which resulted in companies’ closures, declines in new supply orders, stock purchases and project delays.

“The latest data collected between 12 and 23 March indicates a severe economic slowdown, even before tighter work and travel restrictions to contain the Corona pandemic,” said Tim Moore, director of economics at IHS Market.

Riyadh suspended all international flights on March 14, and the next day ordered the closure of shopping malls, restaurants, cafes, public parks and gardens, with the exception of grocery stores, pharmacies and food delivery. Umrah flights were also suspended, most public places were closed and internal movement restricted.

Last week, it expanded the procedures for general closure, preventing it from entering and leaving the Jeddah Governorate, after similar steps in the cities of Riyadh, Mecca and Medina earlier last month.

Non-oil private sector output fell in March for the first time in more than ten years. The slight growth recorded last month is due to demand for basic goods and services such as the pharmaceutical and healthcare sectors, as shown by the IHS Market survey.

Corona’s repercussions represent a major setback for the kingdom, which is suffering from the decline in oil revenues with the collapse of prices, while specialized reports pointed to the failure of projects to diversify the economy adopted by Crown Prince Mohammed bin Salman about 4 years ago.

The pressure is exacerbated by lower global demand for oil and a price war between Riyadh and Moscow, which will likely lead to a sharp increase in the public budget deficit this year.

A fateful meeting of oil producers was postponed, which was supposed to discuss measures to stop the feverish race on production between Saudi Arabia and Russia, while US President Donald Trump hinted at imposing duties on imported crude, in light of the continuing conflict that plunges prices and pushes American shale oil companies towards bankruptcy due to the high cost of extracting crude. .

Two sources in the Organization of Petroleum Exporting Countries “OPEC”, told Saturday, “Reuters”, that the emergency default meeting of “OPEC” and its allies will not be held, on Monday, and will probably be postponed to the eighth or ninth of this month, to allow more time to negotiate. Among oil producers around reducing crude supplies.

And in the middle of last month, informed sources revealed, according to Reuters, that Saudi Arabia asked government departments to submit proposals to reduce their budgets by nearly a third, in new austerity steps to meet the sharp decline in oil prices and the consequences of the rapid spread of corona.

Oil prices tumbled during last March to below $ 23 a barrel, losing about two-thirds of its value since the beginning of the year, before rising about $ 34 a barrel at the end of last week with Trump’s statements, in which he indicated the need for Saudi Arabia and Russia to reduce production between 10 and 15 million barrels per day To support prices.

While some believe that Saudi Arabia might attract additional customers to the cheap crude that flooded the markets, analysts cautioned about the consequences of continuing prices at low levels, especially in light of the slowdown in global demand with the repercussions of the Corona outbreak.

Saudi Arabia, the world’s largest oil exporter, relies heavily on crude revenues. The International Monetary Fund recently said that Riyadh needs a price of $ 80 a barrel to set the 2020 budget, whose deficit is estimated at 187 billion riyals (50 billion dollars) before the Corona pandemic.

This deficit comes for the sixth consecutive year, which indicates an increase in the use of borrowing and withdrawing from the cash reserves to spend, and stimulating the slowing economy due to low oil prices. The public debt of Saudi Arabia amounted to 678 billion riyals ($ 181 billion) until the end of 2019, constituting 24 percent of GDP.





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