The COVID-19 pandemic has had a profound impact on economies worldwide, and Saudi Arabia was no exception. However, there are positive signs that the Saudi Arabian economy is bouncing back from the pandemic. In this article, we will explore the insights and analysis of how the Saudi Arabian economy is recovering post-pandemic.
Economic Diversification Plan
Oil prices are the backbone of Saudi Arabia’s economy, accounting for around 50% of its GDP. However, the pandemic’s decline in demand and price shock badly shook the country’s economy. To reduce dependence on oil, the Saudi Arabian government developed a strategic plan named Vision 2030, aimed at diversifying the economy and developing new industries. Vision 2030 is focused on three primary themes: a vibrant society, a thriving economy, and an ambitious nation.
Through a series of initiatives, the government is offering incentives to attract foreign investors and develop new industries, such as healthcare, tourism, and technology. These initiatives include an increase in government spending, relaxed visa requirements, and the creation of free zones. Accordingly, tourism revenue reached an all-time high of $12bn in 2019.
Fiscal and Monetary Policies
The pandemic heavily impacted individuals and businesses alike, but the government took decisive steps to provide relief. These initiatives included paying the salaries of private-sector employees, subsidies for electricity and water bills, suspension of rental payments, and a reduction in interest rates by the central bank. Additionally, the government announced an economic stimulus package comprising $32bn to support businesses and individuals adversely affected by the pandemic.
These initiatives have helped maintain liquidity in the banking sector to continue lending, which supports individuals and businesses during this time. According to the Saudi Arabian Monetary Authority (SAMA), the total credit facility granted by banks rose by 14% in January 2021 compared to the previous year’s figure.
Digitalization
The adoption of digital technologies has accelerated significantly since the start of the pandemic to maintain social distancing and avoid physical contact. The government launched several digital initiatives to improve the ease of doing business, such as an online portal to register new companies, an online platform to clear goods, and an electronic system to apply for visas.
Furthermore, the pandemic acted as a catalyst for businesses to adopt digitalization as a survival strategy. Restaurants, retail stores, and even traditional souks moved their businesses online to continue operations. This trend is expected to continue, with businesses incorporating digital technologies into operations.
Conclusion
Saudi Arabia, like many other countries, felt the impact of the COVID-19 pandemic. However, the country has shown resilience and is pushing for diversification and development of new industries. The government’s fiscal and monetary policies have helped support individuals and businesses during the challenging time, and the adoption of digital technologies has provided businesses with an alternative to maintain operations.
Overall, the Saudi Arabian economy is showing signs of recovery post-pandemic. The Vision 2030 plan and its implementation will play a vital role in enhancing the economy over the coming years.
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