MANAMA: The Kingdom of Saudi Arabia’s austerity measures aims at closing the gap between income and expenditures are likely to yield positive results, according to an expert.
“The austerity measures taken up by Saudi Arabia comes at a time when the kingdom is reshuffling its financial systems. Considering the country has been experiencing a two-year fiscal deficit, the fall in oil prices from over $100 last year to $50 this year have meant their profits have also slumped by half. The commendable aspect here is that the Saudis have recognised and swallowed this hard fact, and have now focused on a building and sustaining a post oil economy. They have achieved a record sale of close to $17.5 billion though their lower credit rating relative to Qatar and a need to make the issue successful meant they paid a spread of about 40 bps over Qatar. This was attractive pricing and attracted huge demand. The prices of the bonds have shot up in early trading and the spread has tightened significantly,” speaking in relation to Saudi Arabia’s recent economic performance, Mihir Kapadia, CEO and Founder of Sun Global Investments, has said.
“Crude hitting $52 certainly comes as a welcome relief, especially for the emerging economies considering they rely on the oil and gas sector for their fiscal performance. At the beginning of this year when the price of oil was USD 28, we put out a detailed forecast for an end year forecast of USD 55 per barrel and we see no reason for changing this forecast. In the meantime, the generally lower oil prices compared to two years ago have given a boost to energy deficient EM countries such as India.”