Saudi Arabian Economy Incurs Loss Amid Pandemic and Political Lapse
Over the time, Saudi Arabia – the second-largest Arab country, has invited a lot of scrutiny over its actions. Could it be because of Crown Prince Mohammed bin Salman, who was the world’s youngest prince at the time of his appointment? Evolving the Saudi Arabian economy has always remained a key-objective of MbS, although the path has never been easy for him.
Despite being a regional and middle power, Saudi Arabia has constantly been involved in several controversies since Salman was appointed as the crown prince in June 2017. The losses in the wake of the conflicts have existed ever since. A study shows that the country has one of the world’s youngest populations, which is one good reason as to why the Saudi Arabian economy never incurred huge losses. Its dominance in the Middle East has only grown with time.
But, the COVID-19 pandemic has brought unfavourable conditions for the Kingdom. The critics believe that it is not only the virus that is affecting the Saudi Arabian economy, but the decisions taken by the crown prince bear equal responsibility for the current economic crisis that the kingdom is in. His ill-timed oil war against Russia that recently ended, has left the Kingdom facing the steepest contraction amid the COVID-19 crisis.
Throughout the war, the US shale industry remained the principal target. In the first oil war, Saudis aimed to halt the development of the US shale sector by pushing oil prices so low through overproduction that many of its companies went bankrupt. Similarly, in the second war, Saudi added the target of stopping the US shale producers from scooping up the oil supply contracts.
It has been noted that the collective economic damage amid the ongoing crisis might force the crown prince to make deep cuts to his “Vision 2030” plan. Due to the unexpected impact of the COVID-19 pandemic, plans to set up new industries in the country have been halted. Also, Saudi’s poor human rights records have laid huge challenges in its development plans.
Due to the decline in global oil markets amid the pandemic, for the first time, Saudi Finance Minister in early May announced that the country was facing a severe economic crisis. This is because more than 60 percent of government’s revenue comes from oil and the lowered prices have halved the take.
To avoid the growing loses, Saudi will now use cut-measures in government spending. MbS has also ordered austerity measures that would include tripling of the value-added tax and cuts to bureaucrats’ allowances. This will be a violation of the parameters set under Saudi’s Vision 2030 plan and will bring dissatisfaction amongst the employees.
Prosperity post the pandemic now appears to be a difficult task to achieve. Only if MbS rethinks of the damages made to the Saudi Arabian economy due to constantly changing ways, the country will once again have a chance to prosper. The US-Saudi relationship that has long been criticised because of the crown prince’s growing hostility in Congress, is one of the first things that requires changing.
Today, out of the eight countries with which Saudi Arabia has land borders, relations with two – Yemen and Qatar – are hostile; with two others – Oman and Iraq – are often frosty. Now that the Saudi Arabian economy is slowly collapsing, there is a need that the crown prince makes efforts to improve relations with the neighbouring countries.
If not, then there is a high possibility that Saudi that has already lost two oil price wars in the last decade, will continue losing such wars in the future too.
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