Call me an optimist but working closely in Saudi market since 8 + years and being in the region for 35 years ( by birth ) , I can say with lot of confidence that Saudi is the most misunderstood market of GCC. The one main reason for the same is people predicting future outlook & economy of Saudi Arabia are most of the times neither based there nor ever visited that place.
Saudi was never in severe recession as you see most of the times predicted by the “experts” – there was undoubtedly a slow down, due to unfortunate decline of oil prices and few other geo-political reasons, the spending pattern went to a ” Bit Cautious” . To make it simple for people to understand, I often quote the example of an employed person living with his family and getting a salary of USD 20 per month. His expenses are USD 10 and remaining are his savings. He continues to enjoy his life for many years until one day his salary is reduced to USD 10 which is just barely meeting his expenses with no more savings possible. Hence there will be a bit of pressure on the wife to cut down the luxury expenses until things settle down.
The other reason for the panic is that this was literally the first time Saudi witnessed a slow down and hence companies and organisations were never ready to react.
The major contributing factor to Saudi’s slow down was more of a “mental chaos” created by critics and media – the locals ( Saudi Nationals) went to ” Bit Cautious” mode in terms of spending due to various rumors and government’s policy to control the “luxury expenses”.
At present, the global Geo-political situation, positive progress in US-KSA relationship, improved oil prices, announcement of re-reinstatement of public sector’s bonuses along with aggressive & young leadership has already started to stabilize the ‘mental recession’ and increase consumer confidence and spending. My personal interaction with few of the major retailers in the country confirms that the trend is consistently improving since Q4 of 2018 with first month of 2019 having improvement over 2018.
Early Ramadan in 2019 along with improved confidence will see more stability in 2019 which will be perceived as growth. This will help H1 in 2019 to perform better, increasing confidence of the corporate sector to loosen further their spending and payments flow which was paused for past many months.
KSA due to its local dense population will always be the least affected market in GCC when it comes to expat migration. I understand that the increased visa taxes may be burden to people but once the Salary gets cut ( which is the earning of country) it is must to control ‘ Luxury expenses’ and create more ways of generating revenue. Saudi Arabia is still one of the most affordable countries to stay in the region , with excellent infra structure, affordable lifestyle, accessible health & schooling and extremely reasonable house rents.
I hope critics of increased visa fee look at the positive side of the benefits : more money generated will help government do more spending on infra structure and create better environment to attract foreign investments. As a result this will only help the Kingdom’s economy to grow and help all stake holders. For all these years, government was kind enough to spend from their savings but with reduced income, it is getting important to sustain country and it is extremely fair to expect everyone to contribute.
Overall this stability of spending along with inflation will at least result 5-7% growth by end of the year. What Saudi is witnessing now is nothing new but a transition to much more matured market.
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