Khobar, Asharq Al-Awsat—Royal decrees issued by Saudi King Salman Bin Abdulaziz on taking the throne in January, including providing all government employees with two months’ salary bonuses, have resulted in a 0.78 percent boost in Saudi Arabia’s gross domestic product (GDP), a well-known British investment group estimated this week.
The Ashmore Group released a report this week in which it analyzed the economic consequences of approximately thirty royal decrees issued by King Salman on his ascension to the throne. The decrees include payment of two months of additional basic salaries or similar rewards to a wide range of state and military employees, retired government and private sector workers, public sector students and social security beneficiaries resulting in increased consumer activity.
King Salman also provided financial grants to professional associations and sports and literary clubs around the Kingdom and 20 billion Saudi riyals (5.33 billion US dollars) in spending to improve electricity and water services.
This comes despite the continuing deteriorating price of oil, with Ali Al-Naimi keeping his post as Saudi Arabia’s oil minister under King Salman, widely seen as a signal that Riyadh does not intend to cut the Kingdom’s oil output. Despite decreasing oil prices, Ashmore Group reported that Riyadh will be able to sustain these new economic measures given its financial reserves.
The Ashmore Group estimated new spending announced by King Salman will amount to 32.2 billion dollars, with 80 percent of this falling under current spending and 5.3 billion US dollars in capital expenditure over the next few years.
The report estimates that this expenditure will be equal to 4.4 percent of Saudi Arabia’s estimated GDP for 2015, which it puts as 732 billion US dollars.
The report, compiled by Ashmore Group analysts and Jan Dehn and John Sfakianakis, states: “The majority of the measures are consumption-driven and would have a direct one-off impact.”
“The payments are expected to be made over the course of the next four weeks. Such measures are not atypical at the outset of a new monarch’s tenure. They are considered good politics and always positively received by society as a gesture of goodwill by the new monarch,” it continues.
The report added that King Salman’s economic decrees, including the bonus payments, have seen a positive reaction from private sector employers, who have taken similar decisions.
“Just like in previous times, the private sector reacted to such measures and many have instituted basic salary increases or parallel monthly basic salary hand outs. This will have an impact for more than two million private sector Saudi employees as well as many expatriates. Caps have been placed as private sector wages are many times over public sector salaries,” the report said.