Coronavirus could make a mirage of Saudi's Vision 2030
As nations the world over moved into lockdown, reigning King Salman on 19 March warned that the kingdom faced a "more difficult" battle ahead amid the coronavirus crisis and oil price war with Russia, both of which put the Saudi kingdom's very stability at risk.
Though Saudi Arabia has presented itself as a leader in the battle against coronavirus, with King Salman hosting the G20 meeting on 26 March to address responding to the pandemic, Riyadh's own emerging troubles and apparent mismanagement of the crisis were brushed over, in what was was largely a PR measure.
Saudi Arabia initially politicised the coronavirus pandemic, for instance cordoning off the Shia-majority Qatif region on 8 March, after pilgrims returned from Iran, and then blamed Iran for not managing the problem. One Saudi journalist even crudely accused Qatar of creating the virus to undermine Saudi Arabia's Vision 2030 and the United Arab Emirates' Dubai Expo 2020.
Furthermore, in a move which migrant advocates deemed inhumane, Saudi Arabia deported thousands of Ethiopian migrants in the first 10 days of April, as its economy contracted, risking further spreading the virus.
|A recession would impact investors' desire to invest in Saudi Arabia, leaving Vision 2030 an even more distant prospect|
Reports suggesting that Saudi Arabia faces a staggering 200,000 recorded cases, and that up to 150 members of the royal family already have Covid-19, mean that the virus could shake the kingdom to its foundations. Such fears have forced Riyadh to act more seriously, imposing 24-hour curfews in major cities on 6 April, and creating a stimulus package of 120 billion Saudi riyals ($32 billion) to revitalise the economy and provide extra assistance to small and medium sized businesses.
This week in Saudi Arabia concerns over food shortages emerged, after promotional deals on food staples, including rice and vegetable oil were banned.
Yet Mohammed bin Salman's ambitious Vision 2030, designed to diversify and "modernise" Riyadh's economy while reducing its oil dependency, could be one of coronavirus' greatest casualties. The scheme has already stagnated, highlighting the far-fetched prediction that by 2020 the kingdom would shift away from oil dependency - a far cry from the reality.
More critically, MbS could lose out on one of his prized assets: the annual Hajj pilgrimage, due to take place from 28 July until 2 August this year.
Read more: Coronavirus exposes vulnerable GCC markets to a glimpse of post-oil reality
The Hajj pilgrimage is a central element of Saudi Arabia's economic prosperity, offering more immediate revenue than other new and so far unstable sources. The two holy cities of Mecca and Medina have long been used to legitimise Saudi Arabia, positioning itself as Islam's patron.
Yet unprecedented and shocking scenes of the Kaaba inside Mecca's empty Grand Mosque point to a grim reality for MbS' plans. Even the deadly so-called Middle East Respiratory Syndrome (MERS) of 2012 did not force a cancellation of Hajj.
After halting travel to Mecca and Medina in late February, Saudi Hajj Minister Mohammed Banten on March 31 requested the roughly 2 million pilgrims to Hajj put their plans to make the trip in July and August on hold. Umrah, the 'lesser' but still significant pilgrimage which can take place annually, has also been indefinitely closed.
Experts believe that lockdowns ending and some normal activity resuming by summer 2020 is an absolute best case scenario, while others predict travel plans may not resume for longer. This threatens Riyadh with a loss of vital religious tourism revenue, after having built luxurious hotels to commercialise Hajj, and damaging MbS' moves to further profit from the pilgrimage.
However, this is not the only impact of coronavirus on Saudi Arabia's Vision 2030, which will face further disruptions in the short and medium term. Riyadh will have to put many business and tourism projects on hold, such as its $500 billion futuristic city, Neom.
|Lower revenues mean less ability to invest in its non-oil sectors|
As much of the world will likely fall into a recession, the International Monetary Fund (IMF) expects Saudi Arabia's economy to contract 2.3 percent in 2020, with its non-oil GDP falling by 4 percent. Though less than the United States' expected loss of 5.9 percent, Riyadh still stands to make long-term losses for its plans. A recession would impact investors' desire to invest in Saudi Arabia, leaving Vision 2030 an even more distant prospect.
In fact, Riyadh's economic vulnerability became clear after demand for oil plummeted amid the coronavirus crisis and the oil price war with Russia, creating the biggest oil shock since 1973 - which, in contrast to the current crisis - created higher oil prices.
Though both countries agreed to a mutually acceptable deal to cut production last week, oil prices are still arguably too low to revitalise Riyadh's economic growth. Demand has fallen by between 25 and 35 million barrels per day - still much higher than the 9.7 billion barrels per day oil producing nations agreed to cut. Analysts are already warning that continued lower oil prices could further widen Saudi Arabia's deficit.
More critically, Saudi Arabia's price war with Russia revealed an ongoing dependency on oil economic development, while lower revenues mean less ability to invest in its non-oil sectors. With exports sinking, and limited hope for short-term recovery, Saudi Arabia is ultimately likely to struggle as a result.
Unlike other countries, Saudi Arabia has enough financial reserves to withstand this current crisis, though MbS will face an uphill battle to restore his vision. Already pursuing an erratic power-grab with another round of royal arrests in March, MbS has driven Saudi Arabia's increasingly aggressive nationalist stance in parallel with these economic reforms.
Coronavirus will further trigger panic in MbS' mind, likely leading to more irrational measures to protect his grip on power. More so than ever before, Saudi Arabia's future looks increasingly fragile.
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Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, al-Araby al-Jadeed, its editorial board or staff.