Riyadh’s rapid-fire reforms may cause policy overload

Subject

The outlook for the Saudi private sector.

Significance

The private sector is meant to be the key driver of economic growth and diversification under reforms championed by Crown Prince Mohammed bin Salman since 2015. Privatisation and local content in government procurement are key policy priorities, as is the development of new sectors such as tourism and entertainment. Yet private business remains deeply dependent on state spending for growth, suffers from policy unpredictability and limited coordination with government, and faces a contractionary fiscal outlook.

Impacts

• Oil prices are unlikely to rise sharply, limiting Saudi fiscal space to encourage business.
• Only a highly transparent and limited prosecution process in corruption cases would re-establish trust among Saudi merchant families.
• Foreign investors will be cautious in assessing the government’s commitment to its stated priorities and delivery capacity.
• Saudi economic stagnation could have a knock-on impact on other Gulf Cooperation Council (GCC) economies.