Coronavirus, oil crash impact on Saudi Arabia’s economy to be felt from Q2: Minister

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The impact of the coronavirus pandemic and collapsed oil prices on Saudi Arabia’s economy and finances will show in the results of the second quarter of the year, said Finance Minister Mohammed al-Jadaan.

“The precautionary measures taken by the government, and the significant results of those steps on the economy and on public financing, both globally and within the Kingdom, these will show in the second, third and fourth quarters depending on developments in the health and economic [sectors],” al-Jadaan said in an interview with Al Arabiya.

Saudi Arabia’s revenues dropped due to historically low oil prices and reduced economic activity amid lockdowns and curfews implemented to curb the spread of the coronavirus.

Oil revenues fell 24 percent in the first quarter of this year to 128.771 billion riyals while non-oil revenues fall 17 percent to 63.3 billion riyals.

“Revenues have seen a huge drop and are expected to continue dropping throughout the year,” al-Jadaan said.

The Kingdom slipped into a $9 billion budget deficit in the first quarter, and its central bank foreign exchange reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011.

However, al-Jadaan stressed that Saudi Arabia is “committed to the task of sustaining public financing and is committed to having enough financial strength to face this crisis even if it is prolonged.”

‘Extreme, painful’ measures

The minister said that the Kingdom is prepared to take extreme measures, “which may be painful, but are necessary for public financial stability.”

Saudi Arabia has reduced its spending to mitigate the impact of the current crisis on its economy, but al-Jaddan said more action still needs to be taken.

“The government has decided to reduce some spending as of now, but this is not enough,” he said.

The minister added that the government is considering delaying some of the projects aimed at achieving the Kingdom’s Vision 2030 ambitious reform plan.

“We are tightening the belt greatly as I said, so we can continue providing basic services for our citizens and manage and operate the government for years in the eventuality that the crisis continues for many years to come.”

He also said that the Kingdom will take up loans of up to 220 billion riyals depending on market conditions and available liquidity.

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