Saudi consumers are optimistic on recovery

Saudis say the pandemic will change their personal and family spending patterns, with 30 percent expecting to spend more on food and drink. (AFP)
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Updated 02 April 2020

Saudi consumers are optimistic on recovery

  • Survey in ten countries finds that Saudis are the most hopeful of a post-virus economic upturn

DUBAI: Consumers in Saudi Arabia are among the most confident in the world that the economy will recover after the slow down because of the coronavirus disease (COVID-19), but they are still reining in spending while the emergency lasts.

That is the main finding of a survey conducted in the Kingdom by international consulting firm McKinsey as part of a global analysis of consumer sentiment in light of the virus’s impact on normal economic life.

There is also a big increase under way in e-commerce and online entertainment as travel restrictions affect everyday activity.

The survey, conducted last week, found that 58 percent of citizens and residents were confident that the economy would rebound within two to three months and would grow just as strong or stronger than before the virus appeared.

That was the highest of ten countries cited by McKinsey. Italy, which has experienced the most severe outbreak in Europe, had the lowest level of optimism, with only 13 percent of Italians believing things would get better quickly after the outbreak.

Only 12 percent of Saudis agreed that COVID-19 would have a “long lasting impact on the economy and show regression or fall into a lengthy recession.” Consumers in the UAE were almost as optimistic as Saudis, with 57 percent confident of a rapid rebound and 15 percent thinking things would get worse.

But a large number of people in the Kingdom said that the outbreak would change their personal and family spending patterns during the crisis. Half of respondents told McKinsey that they worry about the impact of the illness on their overall finances, with 51 percent cutting back spending or saying they have to be careful abut how they sodden their money.

About 36 percent said that uncertainty about the economy was preventing them from making purchases or investments they would otherwise make, but only 16 percent said their income had been negatively affected by the crisis.

There will be a greater focus on essential items. Some 30 percent will increase the amount they spend on food and drink over the next 12 weeks, while beauty and cosmetics sales can expect to see a downturn, with 55 percent saying they will decrease spending on these products.

With widespread curfews in operation in the Kingdom, online consumption is expected to grow significantly. Some 24 percent of those polled said they would buy groceries online over the next two weeks — five times more than before — while 55 percent said they would spend more money on entertainment online. More than 40 percent expect to spend more time using social media and the Internet for education and reading.

Abdellah Iftahy, the McKinsey partner who led the research, said: “The circumstances have required consumers to change their behaviors rapidly, both in terms of consumptions and channels, accelerating the penetration of online industries, such as e-grocery.”

A second survey will be conducted next week to enable comparisons to be made as the outbreak unfolds across the region, McKinsey said.


Oman’s ruler approves fiscal plan to diversify revenue

Updated 16 min 55 sec ago

Oman’s ruler approves fiscal plan to diversify revenue

DUBAI: Oman’s sultan has approved a medium-term fiscal plan to make government finances sustainable, state media said on Thursday, as the coronavirus crisis and low oil prices batter state coffers.

The country has long had plans to reform its economy, diversify revenues and introduce sensitive tax and subsidies reform, but they dragged under the late Sultan Qaboos, who died in January after half a century in power.

His successor, Sultan Haitham, approved a 2020-2024 fiscal plan that included increasing government income from non-oil sectors, state media reported, citing orders from the Sultan.

Oman will also accelerate the establishment of a social security system for low-income citizens who may be affected by the government’s drive to bring down the country’s debt and cut state spending, one of the orders said.

Haitham also ordered 371 million Omani rials ($964 million) of unspecified development projects to be carried out across the country.

Rated non-investment grade by all major credit agencies, Oman’s debt climbed to around 60 percent of gross domestic product at the end of 2019 from less than 5 percent five years earlier.

On Wednesday it raised $2 billion in its first international bond sale since July 2019.  People familiar with the plans had previously said Oman sought to raise between $3 billion and $4 billion in a three-part deal.

However, Oman scrapped a three-year tranche as it faces an aggressive debt repayment schedule between 2021 and 2023 and limited investor appetite for the offer, several bankers and fund managers said.

“Our estimate was that they wanted to do $3 billion. So I think the size might be a bit disappointing for them but I think they should be happier with the price,” Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital.

The country has begun preliminary discussions with some Gulf countries about financial support, according to a bond prospectus seen by Reuters. Bahrain, the only other “junk” rated Gulf country, averted a credit crunch in 2018 when it was bailed out with a $10 billion aid package from its wealthy neighbors.