Consumer spending in Saudi Arabia will be hit hard in 2017 as a result of government austerity measures, according to a new report from BMI Research.
The firm predicted – as it did earlier this year – that 2017 will see the Kingdom’s economy recess, thanks largely to the effects of the plunging oil market. These effects include cuts to government spending on infrastructure, as well as on state services.
This in turn would affect consumer sentiment, with citizens increasingly tightening their belts, BMI said.
“Saudi consumer will be hit hard as a result, with private consumption expected to grow at a subdued 1% year-on-year next year – the lowest rise since 2002,” the report said.
“The fall in consumer purchasing power will lead households to cut back on spending in 2017, particularly in terms of ‘non-essentials’. Meanwhile, retailers will brace themselves for lower demand, delaying hiring and investment.”
Indeed, this is already being seen, BMI said. The firm noted that, during the third quarter of 2016, point-of-sale transactions had declined by 11% year on year. The firm also said that consumer credit growth had been slow.
What’s more, with two-thirds of the workforce being employed by the public sector, government fiscal reforms will directly impact household revenue, BMI said.