Saudi GDP Projected to Contract 5.2% in 2020: IIF
DUBAI (Dispatches) - Saudi Arabia’s economy plunged by about 11 per cent in the second quarter of 2020 year on year, according to the latest estimates by the Institute of International Finance (IIF), the global association of the financial industry.
The sharp contraction follows a 1 per cent decline in GDP in the first quarter 2020, fueled by pandemic-related restrictions on economic activity and the fall in crude oil production in the context of the OPEC+ production cut agreement.
The IIF projects an overall GDP contraction in excess of 5 per cent this year.
"We expect the economy to contract by 5.2 per cent in 2020 followed by a growth of 2.3 per cent in 2021, driven mainly by the non-oil private sector,” said Garbis Iradian, Chief Economist, MENA, IIF.
Monetary easing could limit the economic fallout from the COVID-19 and the plunge in oil prices, the IIF said. The repo rate has been reduced by 125 bps to 1 per cent, and SAMA (the Saudi central bank) has introduced liquidity support measures amounting to 3 per cent of GDP to support the private sector, particularly SMEs, which may be less equipped to tackle large temporary shocks. SAMA has also put mechanisms in place to encourage commercial banks to postpone private sector loan repayments for six months.
The sharp contraction follows a 1 per cent decline in GDP in the first quarter 2020, fueled by pandemic-related restrictions on economic activity and the fall in crude oil production in the context of the OPEC+ production cut agreement.
The IIF projects an overall GDP contraction in excess of 5 per cent this year.
"We expect the economy to contract by 5.2 per cent in 2020 followed by a growth of 2.3 per cent in 2021, driven mainly by the non-oil private sector,” said Garbis Iradian, Chief Economist, MENA, IIF.
Monetary easing could limit the economic fallout from the COVID-19 and the plunge in oil prices, the IIF said. The repo rate has been reduced by 125 bps to 1 per cent, and SAMA (the Saudi central bank) has introduced liquidity support measures amounting to 3 per cent of GDP to support the private sector, particularly SMEs, which may be less equipped to tackle large temporary shocks. SAMA has also put mechanisms in place to encourage commercial banks to postpone private sector loan repayments for six months.