Saudi Arabia’s austerity drive ‘decisive and necessary,’ but could delay a consumer recovery

Saudi Arabia’s austerity drive ‘decisive and necessary,’ but could delay a consumer recovery

The fiscal measures come as the entire Gulf region is reeling from the double blow of global lockdowns and the lowest oil prices in two decades.. The kingdom will triple value-added tax (a sales tax known as VAT) from 5% to 15% in July, suspend its cost of living allowance for public sector workers, and cut and delay projects part of Vision 2030, the multi-billion dollar initiative aimed at diversifying and reforming the Saudi economy.. "Further cuts to capital spending by the government will weigh on non-oil sector activity this year and probably next year as well, as government spending remains a key driver of non-oil activity despite efforts to diversify the economy," Khatija Haque, head of MENA research at Dubai-based Emirates NBD, wrote in a research note Monday.. It's also likely to delay a recovery in spending for the kingdom in 2021, Haque wrote.. There is very little in the way of non-oil revenues for the tax increase to boost.. Saudi Arabia is considered the most economically well-buffered of the GCC countries, with more than $470 billion in foreign reserves as of March, by far the highest in the Middle East and among the top 10 globally