Painful economic reforms but plenty of light at the end of the tunnel
Saudi Arabia is embarking on a massive economic transformation and restructuring initiative. Vision 2030 and the National Transformation Program (NTP) outline an extremely ambitious roadmap for a complete turnaround of the Saudi economy.
This plan is meant to prepare the Kingdom for a post-oil era through economic and public sector reforms, encouraging private sector and foreign investment, and gradually opening up the local economy and increasing its competitiveness.
Coinciding with a sharp and seemingly prolonged downturn in oil prices, the implementation of economic reforms is causing stresses on all levels of the economy.
Financial pressures trickled down to all sectors of the economy. The stock market performance was the most visible sign of pain to the outside world. The Tadawul All Share Index (TASI) lost more than 52% peak to trough between September 2014 and October 2016.
With oil prices stabilizing and more financial resources being successfully secured to finance a budget deficit, the most recent being the record USD 17.5 billion international bond issue, the general sentiment seems to be turning increasingly positive.
The Saudi economy is definitely going through what could be one of its most critical junctions. Sticking to planned reform and carrying it forward despite the short term pain will be the biggest challenge. Looking past the short term, however, and given the vast human and capital resources available to the kingdom, the future looks much brighter.
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