Tuesday 2 June 2020
 
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INSIGHT

New Saudi steps will help offset revenue loss: Moody's

RIYADH, 21 days ago

The new fiscal austerity package announced by the Government of Saudi Arabia today will help offset a portion of this year’s revenue loss caused by the sharp decline in oil prices and lower oil production, according to Moody's credit review.
 
Saudi Arabia has decided to triple its value added tax (VAT) from 5% to 15% as part of measures to shore up its economy hit by the impact of Covid-19 and low oil prices. It will also suspend the cost of living allowance.
 
Moody's said the decisions point to the government’s capacity to adjust to shocks. The new spending cuts, together with those already announced in March and those approved in the 2020 budget, are equivalent to nearly 8% of GDP. 
 
Meanwhile, the decision to triple the value-added tax rate to 15% could generate up to 5% of GDP in extra revenue annually. 
 
"In the near term, the VAT hike will likely dampen consumption substantially, adding to the negative economic impact of the fall in oil prices and measures taken to contain the epidemic,” said Alex Perjessy, a Moody’s vice president. - TradeArabia News Service



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