RIYADH – Saudi Arabia’s economy shrank 7 percent in the second quarter from the same period a year earlier, according to sources, while unemployment soared to a high record.
The kingdom derives roughly 80 percent of its revenues from oil.
The oil sector of the world’s largest crude exporter shrank 5.3 percent from April through June as it was knocked sideways by the coronavirus pandemic that gutted global crude demand this year, Aljazeera wrote.
Meanwhile, Saudi Arabia’s unemployment rate in the second quarter surged to an all-time high of 15.4 percent.
While, the Kingdom started to observe budget squeeze that “constricts government spending and austerity measures, including a tripling of value-added tax (VAT)” from 5 to 15 percent, critique suggests clawing back form that hit will likely be harder for Saudi to regain its economic position.
“Even though containment measures have started to be lifted, the imposition of harsh fiscal austerity in recent months means that the recovery will be weak,” Capital Economics senior emerging markets economist Jason Tuvey wrote in a note to clients on Wednesday, as Aljazeera quoted.
The International Monetary Fund expects the Saudi economy to contract 6.8 percent this year and bounce back to 3.1 percent growth in 2021, according to the report.