The Report for the Economic Indicator of the National Economy, prepared by Riyadh Chamber of Commerce, showed that the national economy will record a growth rate of 2.3% during the current year 2016, which is lower than the mean growth rate by 5.5%, which was achieved during the past 5 years, 2010-2014. The forecast stated the cause of change in growth rate to be due to the drop in international oil prices, and a slower rate of global economic development.
The indicator report, prepared by the studies and information section at Riyadh Chamber of Commerce, explained that the non-oil sector can play a primary role in driving the wheel of economic development, and substituting the expected drop due to the decrease in oil prices, by making use of the large governmental investments which have been injected by the state, over the past few years, and also by relying on the results of the economic transformation program adopted by the state, which aims to manage public spending, while maintaining and completing planned programs for development, as well as incentives to hire more Saudi employees and to increase the activity of the private sector.
The indicator, which forecasts the future national economic situation, observed the negative outcomes of the decreased oil revenues on Saudi, which included the need to rely on financial reserves, to make up for the loss in revenue, and the fear of depleting these should oil prices continue to drop long-term. It also included the decrease in governmental investments by the end of 2015, by an amount expected to reach 1.2%, compared to the size of investments in 2014.
The indicator noted the deceleration of the productivity structure in the national economy as a result of lower government spending and the subsequent deflation in economic development. In the same context, as a result of government spending the indicator predicted a fall in importation of capital equipment during 2015 by about 2.2%, compared to the previous year, in addition to a predicted decrease in loans from the Saudi production development fund by approximately 23.4%, compared to the previous year.
On the other hand, the indicator showed the positive outcomes of a reduction in income which are manifested in the consolidation of the economic reform framework, which aims to vary economic activity, and to lessen its dependance on oil revenues, as well as aiming to change the focus of development from the public to the private sector, and to encourage the employment of a 5% greater proportion of Saudis in the private sector during 2015, compared to the previous year.
The indicator also described the government's insistence on maintaining a financial policy which ensures an appropriate level of solvency, in a way that fulfills economic needs, since the level of monetary funds increased by 7.2% during 2015, compared to the previous year, which raises the possibility of monetary lending thereby encouraging further investments and thus enabling a positive outcome in economic development during this period.