Merrill Lynch: The Saudi economy is undergoing a historic transformation

Merrill Lynch officials said at a press conference in Dubai  that “Saudi Arabia’s recent crackdown on corruption will provide additional momentum to ensure the success of reforms and stable energy policy.”

“We believe that the Saudi economy is undergoing an unprecedented transformation as the government seeks to reduce its dependence on oil revenues,” said Hutan Yazhri, head of research for the Middle East and North Africa. To achieve this, the Kingdom is implementing a number of measures, including the pursuit of considerable fiscal control and reduction of subsidies, expatriate fees and the introduction of VAT, measures aimed at stimulating growth in the non-oil economy and the private sector, To attract foreign direct investment ».

“Efforts to support increased female participation in the labor force could add 0.4 basis points to GDP growth if the female participation force reaches the target levels of the NAP by 2020,” the IMF said. This reform may reduce gender discrimination, but it is likely to require either a supportive environment for economic growth to help create jobs, or to find alternatives and labor force Saudization.

A report by Bank of America said yesterday that “rising oil prices are supporting the efforts of the Saudi government to prolong the timetable for strengthening the fiscal situation. However, they may be reassuring and complacent about the pace of future reforms, and this will be reflected in the 2018 budget to be released in late December. ”

“The restructuring of the public investment fund will allow us to focus more on a diversified foreign asset base that in turn could support non-oil revenues, and we believe that the conversion of the public investment fund is still relatively early but has gained momentum with the public investment fund 2018-2020. The restructuring of the Public Investment Fund is likely to allow for greater diversification of foreign assets, which in turn will increase the share of investment income in the budget over time.

“The pace of reform in the Saudi stock markets has been significant in recent years as the CMA sought to make the market more attractive and more affordable to international investors. The changes have also made it more likely that the Kingdom will be included in two key emerging market indexes in 2018, Morgan  Stanley Capital International, and Futsi Russell. “We believe these events provide support to the market given the physical levels of capital inflows that can support it,” he added. The report pointed out that the insurance sector is the main beneficiary of the leadership of the reform, expecting that Saudi banks will benefit from high demand for loans”.