Oil-dependent Saudi Arabia is bracing for a coronavirus-led economic slump on top of possible austerity measures as crude prices go into free fall.
Huge losses are expected after the Arab world’s biggest economy shut down cinemas, malls and restaurants, halted flights, suspended the year-round umrah pilgrimage and locked down eastern Qatif region – home to around 500,000 – in a bid to contain the deadly virus.
The top crude exporter also faces plummeting oil prices, which slipped below $30 a barrel this week for the first time in four years, on the back of sagging demand and a price war with Russia.
The shock of this liquidity sapping cocktail of events has necessitated austerity measures which are likely to imperil grandiose diversification projects.
Adding to the chain of events are the recent arrests of King Salman’s brother and nephew, which triggered speculation of political instability amid the government’s public silence on the royal purge.
It’s crisis time, said a Saudi government employee, explaining why he had begun converting part of his salary into US dollars and gold coins.
Everything is unpredictable and we should be ready for the worst.
The central bank has shrugged off fears that plunging oil prices were straining the kingdom’s currency, pegged for decades to the US dollar.
A jeweller in Riyadh told AFP he had fielded a number of enquiries to convert “substantial amounts of cash” into gold bars and coins.
As economic challenges rise, the detention of royal princes Ahmed bin Abdulaziz al-Saud and Mohammed bin Nayef has fuelled fears of instability.
One source close to the royal court dismissed such concerns and said the detentions were meant to send a stern warning within the royal family not to oppose the crown prince.
Yet the threat to Prince Mohammed isn’t coming from his royal rivals, said Kristin Diwan of the Arab Gulf States Institute in Washington.
It’s from the collapse of oil revenues and with them his ambitious economic plans.