Regional economies brace for Saudi budget fallout

This content was originally posted in 7DAYS UAE website at: Regional economies brace for Saudi budget fallout The impact of the Saudi deficit announced last month is going to effect tourism spending in the United Arab Emirates, a finance analyst has said. The announcement from the Saudi government to cut spending and reform finances came after the drop in global oil prices resulted in a record annual budget deficit of nearly $98 billion. The 2016 budget, released by the kingdom’s finance ministry, said the state ran a deficit of 367 billion Saudi riyals in 2015 and the 2016 budget plans to cut that to 362 billion riyals. A report by Reuters last month claimed there were plans to adjust subsidies for water, electricity and petroleum products over the next five years, as well as plans to introduce VAT, in coordination with other countries in the region, and raise taxes on soft drinks and tobacco. All of which is likely to reduce consumer spending in the kingdom – the region’s financial powerhouse. According to consultants Deloitte, Saudis dominate the tourism market in the UAE, with 1.5 million visiting in 2014 in Dubai alone. India followed with 900,000 visitors. Fathi Ben Grira, CEO of Menacorp, a financial services company, said the deficit was bound to create a reduction of tourism numbers in the Emirates and the region in general. He said: “Saudi is the heavyweight of the regional market and controls almost 85 per cent of the activity in the GCC region. Hence they set the trend for the market here and any backlash felt by them will affect the UAE market as well.” Tourism representative Chandan Dutta from the Sun and Sky agency, said they have already seen a slight drop in tourist numbers since the budget deficit was announced. “Saudi tourism is big business for Dubai, not only for leisure but residents of Saudi frequently visit for many reasons, especially from Jeddah and Riyadh,” he said. “We receive huge numbers of tourist all year round – about 10 to 15 per cent of Dubai’s tourism comes from Saudi – and it is certain that will take a hit due to the deficit since we have already seen a slight decrease in the past weeks.” mahak@7days.ae Read the original story at: Regional economies brace for Saudi budget fallout