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Socio-Economic Impact of COVID-19 in the Kingdom of Saudi Arabia and How to Build Back Better

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Socio-Economic Impact of COVID-19 in the Kingdom of Saudi Arabia and How to Build Back Better Socio-Economic impact of COVID-19 in the Kingdom of Saudi Arabia and how to Build Back Better Diagnostics paper UN in KSA, November 2020 1 | P a g e Preface This report was prepared under the overall direction and guidance of the UN Resident Coordinator in the Kingdom of Saudi Arabia, Ms. Nathalie Fustier, and UNDP Resident Representative, Dr. Adam Charles Bouloukos. It includes inputs and is a joint effort of the United Nations Country Team in the KSA. Dr. Mohammed Mudawi, Deputy Resident Representative of UNDP, and Dr. Aljaz Kuncic, Economist with RCO, were technically and organizationally co-leading the UNCT COVID-19 Taskforce and partnering up with Prince Sultan University (PSU) to support these efforts. The findings, interpretations, conclusions and policy recommendations expressed herein are those of the authors and do not necessarily reflect the views or official positions of the United Nations, its officials or Member States. The team would like to express its appreciation for the valuable contributions of the Center for Financial Studies (CFS) at Prince Sultan University,Mr. Ayman El-Hefnawi (UN-HABITAT), Ms. Sara Bin Ayyaf and Dr. Mohammed Mudawi (both UNDP), Ms. Naseem Awl (UNICEF), Mr. Sharif Ahmed Mohamed, Ms. Kristina Mejo, and Ms. Hind Kinani (all IOM), Mr. Khaled Alhmoud (WB), Mr. Sahir Mohyudin (UNHCR), Mr. Saeed Shami (FAO), Mr. Nada Khaled (WHO), Mr. Tariq Haq, Mr. Ahmed Moustafa, and Ms. Aya Jaafar (all ILO), Ms. Shaima Saly (UNFPA), Ms. Ansam Alabayechi (UNOHCHR), Dr. Hatem Aly (UNODC), Mr. David Joy, Mr. Ibrahim Alhelali, Mr. Austin G. Hamilton, and Dr. Aljaz Kuncic (all RCO). 2 | P a g e UN in KSA UN in the KSA ● The United Nations has been actively working with the Kingdom of Saudi Arabia since 1952. ● The UN Country Team (UNCT) comprises all UN entities working in or with the Kingdom of Saudi Arabia. The UNCT is led by the UN Resident Coordinator, Nathalie Fustier, and has been in country since 01 November 2018. ● 20 in total. Twelve agencies, funds and Programme present in country, out of which two are principally in support of operations in Yemen. Eight operate through regional offices and (or) HQs. In Country Presence: ▪ UNICEF, UNDP, FAO, IFAD, WHO, UN-Habitat, OHCHR, UNHCR, ICAO, The World Bank Group ▪ OCHA and WFP (functionally in support of Yemen); Operating through Regional Offices (or) HQ: ▪ UNESCO, IOM, UNEP, UNFPA, ILO, ESCWA, UN Women and UNODC 3 | P a g e Foreword The COVID-19 pandemic coincided with a significant drop in the global prices of crude oil which more than halved in its market value from the start of the year. In the Kingdom of Saudi Arabia, the oil and gas sector accounts for about 50 percent of the gross domestic product (GDP), and about 70 percent of all export earnings. Individual incomes connected to the energy sector have experienced massive drops in the KSA. Low oil prices compound the negative demand and supply shock of COVID-19, and has resulted in a double-digit expected fall of nominal GDP, and forecasts of over 5% fall in real GDP, with both oil and non-oil sectors reporting contractions after the first half of 2020. The Government of KSA demonstrated commendable efforts to contain the spread of COVID-19 through a range of timely and well-developed measures to mitigate the impact. The government invested more than 7% of GDP to alleviate the impact of COVID-19 on the economy, the labour market, and individuals. Despite the good efforts of the Government, however, the scale of the COVID-19 pandemic is generating socio-economic disruptions in the country and beyond, affecting every sector of the economy and every aspect of life, with some groups such as temporary contractual workers in KSA being particularly affected, and the effects of lower remittances affecting their home countries considerably as well. Most mitigating measures already in place are supporting businesses or Saudi national public and private sector employees, with the exception of the General Authority of Awqaf community fund and Ramadan Aid, directly aimed at the most vulnerable segments of the society. This is in addition to the distribution of food aid packages by the Saudi Food Bank, including through the UN-Network on Migration in KSA. The most at risk who include poorer segments of Saudi society as well as non-Saudi citizens, predominantly working in the private (and some of them, informal) sectors, are disproportionally negatively affected by the recent VAT increase and the reduction in salaries (or in the case of working in the informal sector, complete loss of incomes). These vulnerable populations are at the very center of this impact analysis which aims to identify measures to support the Government’s efforts. The United Nations in KSA has been working on two key documents to articulate how the United Nations can continue to support the Kingdom in its COVID-19 response and guide our collective discussion with the Government and other partners. The UN COVID-19 Capacity Brief, submitted to the Government at the end of June 2020, contained a collation of 67 ongoing activities and projects which could be enhanced or accelerated to support the Government’s COVID-19 response, as well as new activities aimed at COVID-19 mitigation. The present United Nations Diagnostics Paper on Socio-Economic impact of COVID-19 in the Kingdom of Saudi Arabia summarizes the economic and social landscape of KSA with a focus on the potential impact of COVID-19 and the oil price crisis, utilizing the leave no one behind (LNOB) lens, and further enlarges the non-exhaustive set of possible UN support and policy recommendations, including the ones already included in the UN COVID-19 Capacity Brief. The UN in KSA is looking forward to discussing how the findings and recommendations of both the UN COVID-19 Capacity Brief and the UN Diagnostics paper on the Socio-Economic impact of COVID-19 in the Kingdom of Saudi Arabia can further support the Government of KSA while contributing to the Vision 2030, as well as the United Nations 2030 Agenda and Sustainable Development Goals. Ms. Nathalie Fustier Dr. Adam Charles Bouloukos Resident Coordinator Resident Representative United Nations United Nations Development Programme Kingdom of Saudi Arabia Kingdom of Saudi Arabia 4 | P a g e Table of Contents Executive Summary .............................................................................................................................................. 8 Introduction ......................................................................................................................................................... 12 Part I-The Starting Point ...................................................................................................................................... 20 Overview ......................................................................................................................................................... 20 Economic Analysis: Major milestones achieved despite certain hiccups ............................................... 21 A. The Structure of GDP ............................................................................................................................. 22 Consumption and Government Spending (C+G) ............................................................................ 22 Investment (I) ........................................................................................................................................ 22 Net Export (NX) ..................................................................................................................................... 22 B. Fiscal, Monetary and Employment Situation ....................................................................................... 24 Budget Structure ................................................................................................................................... 24 Fiscal Deficit .......................................................................................................................................... 25 External Account .................................................................................................................................. 25 Public Debt ............................................................................................................................................ 26 Monetary Policy and Inflation ............................................................................................................. 26 Employment .......................................................................................................................................... 28 C. Social and Demographic Situation ..................................................................................................... 34 Healthcare System ............................................................................................................................... 34 Education .............................................................................................................................................. 43 Population ............................................................................................................................................. 50 Housing .................................................................................................................................................. 53 Poverty & Inequality ............................................................................................................................
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