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Edition August 1, 2017 - Crédit Agricole S.A.
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  • Edition August 1, 2017

    Saudi Arabia – The rentier model in an era of reform and regional crisis

    The lasting drop in the oil price to around 50 dollars a barrel is undermining the deeply rentier Saudi economy, which derives 90% of its tax receipts. A huge long-term structural reform plan ("Vision 2030") is ongoing to wean the country off its rentier economy. It is extremely ambitious, especially in its social components, where the challenges are greatest. However, the political and geopolitical environment is a source of growing concern.

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  • Content:

    - Data and forecasts
    - A sharp deceleration in GDP growth
    - Macroeconomic imbalances are progressively being corrected
    - Still very modest structural reforms
    - Monetary policy still firm on the dollar peg but debate has undoubtedly begun on the long-term situation
    - Banking system holding up well in the crisis
    - The Vision 2030 plan is highly ambitious and its results still uncertain
    - Considerable demographic and social challenges in the mid-term
    - Rating: sovereign risk up
    - A political situation likely to change and a tense geopolitical and regional situation, illustrated by the crisis with Qatar.

  • Extract - Considerable demographic and social challenges in the mid-term

    Saudi Arabia has a population of 31 million, with Saudis numbering 21.6 million, and growing by 2.1% a year. They are young (56% are under 30), which poses a major job creation problem for young Saudi nationals entering the labour market. Given the scale of the foreign labour force in the Construction industry and in many relatively unskilled jobs, only 45% of positions are occupied by Saudi nationals, a proportion that the authorities are trying to increase by regulating the "Saudisation" rate according to activity sector. Most Saudis are public servants (two thirds are employed in the public sector: defence, education and healthcare) and their wages are the main item of state expenditure. In addition, the unemployment rate among native Saudis is far higher than the national average (11.7% vs less than 6%), partly due to a mismatch in the training of labour for the requirements of businesses (people are overqualified but in such a way as not to be useful, professionally).

  • Saudi Arabia: Sovereign ratings LT

    Due to the deterioration in the large macroeconomic balances, and the rise in public and foreign debt, the rating agencies downgraded the Kingdom's sovereign rating between 2015 and 2017. Even so, the rating is still between four and seven notches above the investment grade threshold.

    Saudi Arabia: Sovereign ratings LT
  • Associative topics : Africa and Middle East | Economics


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