Other economic Developments - February 2018

1) Saudi economy: On 1 January, Saudi Arabia announced a SR 978 billion ($ 261 billion) budget for 2018, describing it as the largest budget in its history in terms of spending. 
 
The budget, which in the past has been 90 percent dependent on oil revenues, is this year not more than 50 percent based on revenue from oil. The remainder is 30 percent from non-oil revenues, 12 percent from public debt and 8 percent from government funds.
 
On 23 January, as oil prices rise, the International Monetary Fund raised its economic growth forecasts for Saudi Arabia. Gross domestic product will likely grow 1.6 percent this year, compared to an earlier forecast of 1.1 percent. The IMF also revised its 2019 economic growth forecast to 2.2 percent from 1.6 percent. The government expects GDP to grow 2.7 percent this year.
 
2) VAT introduced: On 1 January, Saudi Arabia and the UAE introduced a value-added tax (VAT) rate of 5 percent, making them the first states in the region to introduce an additional tax for most goods and services, including food and clothing, as well as water and electricity bills. Analysists forecast that the added 5 percent tax hike could see the Saudi Kingdom and UAE raise a combined amount of $21 billion in 2018 alone, equivalent to around 2 percent of gross domestic product. The UAE Finance Ministry said that VAT returns would go towards "infrastructure development ... (to) upgrade public services ... and boost UAE economy competitiveness."
 
 
February 1, 2018 
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About the Author

Ambassador Talmiz Ahmad joined the Indian Foreign Service in 1974. Early in his career, he was posted in a number of West Asian countries such as Kuwait, Iraq and Yemen and later, between 1987 and 1990, he was Consul General in Jeddah. He also held positions in the Indian missions in New York, London and Pretoria. He served as Indian Ambassador to Saudi Arabia (2000-03; 2010-11); Oman (2003-04), and the UAE (2007-10). He was also Additional Secretary for International Cooperation in the Ministry of Petroleum and Natural Gas in 2004-06. In July 2011, the Saudi Government conferred on him the King Abdul Aziz Medal First Class for his contribution to the promotion of Indo – Saudi relations. After retirement from the Foreign Service in 2011, he worked in the corporate sector in Dubai for three years. He is now a full-time academic and holds the Ram Sathe Chair for International Studies, Symbiosis International University. He has published three books: Reform in the Arab World: External Influences and Regional Debates (2005), Children of Abraham at War: the Clash of Messianic Militarisms (2010), and The Islamist Challenge in West Asia: Doctrinal and Political Competitions after the Arab Spring (2013). He writes and lectures frequently on Political Islam, the politics and economics of West Asia and the Indian Ocean and energy security issues.