Saudi Arabia’s gross domestic product (GDP) fell by 13 percent year-on-year during the
second quarter of 2020, according to London-based research firm Capital Economics.
Jason Tuvey, Senior Emerging Markets Economist told the media, “Overall, after
recording a contraction of 1.0 percent y-o-y in Q1, we estimate that the Saudi GDP fell
by 13 percent y-o-y in Q2. We expect that the recovery will remain slow as austerity
weighs heavily on consumer-facing sectors, the suspension of Umrah pilgrimages
continues to hit the tourism sector, and the oil sector remains a key drag on the
economy.”
“All told, we forecast the Saudi economy to contract by 7.3 percent this year and, by
end-2022, GDP is likely to still be 5.5 percent below its pre-virus path” Tuvey added.
The year has been a challenging one for Saudi Arabia who earlier led the Organisation of
the Petroleum Exporting Countries (OPEC) into a oil price war with Russia. To add to its
miseries, the pandemic has significantly slumped demand for crude as well as its prices.
Saudi Arabia also tripled its value-added tax (VAT) from 5 percent to 15 percent on July
1 st , 2020. The increase in VAT is a part of the government’s measures to compensate for
the loss in state revenue due to depleting oil prices and the coronavirus pandemic.
Bloomberg reported that Saudi Arabia has cut its official selling prices for crude oil in
the latest sign that demand recovery is stumbling.
The kingdom lowered its selling prices for both its buyers in Asia as well as the US.