World Economy
0

Saudis Grappling With Joblessness, Debt, Inflation

Saudis Grappling With Joblessness, Debt, Inflation
Saudis Grappling With Joblessness, Debt, Inflation

Rising unemployment and government debt levels continue to be the main challenges for Saudi Arabia’s Vision 2030 economic plans,  a new report issued by National Bank of Kuwait says.

Job creation was a core goal of the kingdom’s Vision 2030 economic reforms, with authorities hoping to reduce the unemployment rate from 11.6% in 2015 to 7% by 2030. However, the NBK report said that the rate has instead risen to 12.9% in the first quarter of 2018, as the young labor force expands quicker than authorities can create new jobs, Zawya reported.

On the bright side, there has been growth in the non-oil sector, which the government hopes will spur growth job creation in the private sector. Non-oil revenues have doubled since 2014, reaching 256 billion Saudi riyals last year, now representing around a third of overall revenues, the NBK report said.

Growing government debt is also a major factor to watch, with the NBK report estimating that debt levels will rise from 17.3% of gross domestic product in 2017 to 24.6% of GDP by the end of 2019.

NBK expects Saudi authorities to issue $37 billion worth of bonds by the end of the 2018 as it increasingly looks to the debt market to fund its expenditure, rather than tap in its reserves.

“We expect the authorities will increasingly try to minimize reserve drawdowns and rely more on debt issuance to take advantage of the still relatively low global interest rates,” the NBK report predicted.

In a bid to rebalance government budgets and boost non-oil revenues, authorities reduced subsidies for citizens and introduced new taxation levels, such as a 5% value-added tax in January.

Meanwhile, the introduction of new taxes led to inflation increasing to 6.8% year-on-year in January, with price rises in the transport, food and restaurant and hotel categories. However, NBK predicts this will be a temporary surge and prices will stabilize going forward.

“We expect inflation to continue to ease to 2.9% (average) in 2018 as the one-off effects of January’s price hikes wear off and given that housing and rental costs, which continue to fall due to a combination of weaker demand and government efforts to make housing more affordable,” NBK said.

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com