Reforms will put the economy back on the right track

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Time: June 01, 2018

Many are hopeful that the economy will recover from the slow and sluggish growth that we have experienced over the past two years and that we will overcome all of the problems that we have encountered, such as unemployment and economic stagnation.

Many businesses have closed some of their branches to reduce operational costs and have let Saudi and expatriate workers go, while some businesses have shut down altogether. Around 490,000 businesses shut between 2015 and 2017. There is no doubt that this is a large number that has impacted us in different ways, such as increasing unemployment from 11.6 percent in mid-2016 to 12.8 percent by the end of 2017. A large number of expatriate workers have also left the Kingdom for good.

When economic reforms were introduced, businesses and individuals were informed that there would be a large but temporary economic and social impact. It was also emphasized that without these economic reforms, the negative impact on society and the economy would be greater and larger. It was important to find a cure for the ills of the economy, which included corruption, monopoly, a dependency on oil, an absence of diversification, speculations, and too great a reliance on non-Saudi workers. The economic reforms brought a lot of pain, but leaving things without change and modernization would have resulted in a lot of ills and structural distortions.

We should understand that all of the sufferings of the national economy are temporary and will end one day. There are no magic solutions as some might imagine. A patient cannot recover from a disease without feeling pain. The reforms were needed to make the economy stronger and to help it overcome obstacles.

Let us imagine what would have happened if no economic reforms had been introduced. The situation today would definitely be very chaotic and disastrous. The economic reforms have helped our economy survive. All economic and financial experts agree on the importance of these reforms. A dependency on oil will not help build sustainable economic growth for the country. The current and future demands and expectations of society have increased dramatically and oil revenue alone cannot meet and satisfy these expectations.

The old economic conditions that lasted for around 50 years negatively impacted the economy and society and increased economic distortions decade after a decade. Reforms were needed to put the economy back on the right track and achieve more stability, something that will lead to more positive results within a decade from now.

There is no doubt that it is a tough path for us to follow, but over time things will start to improve. I am sure that all of us are aware of the current difficulties in our economy, which can hinder growth and development. I am talking here about unemployment, housing problems, faltering development projects, financial corruption, monopolies, price manipulation and tasattur (the process of non-Saudis running businesses in the names of Saudis).

Many people and businesses thought that the increase in unemployment and the slow growth in the economy and other negative indicators happened as a result of the current economic reforms. This is not true. All of the negative impacts we are experiencing today are the result of economic distortions and our dependency on oil. These distortions caused us to rely on oil and expatriate workers and they also led to other problems, such as the monopoly in the real estate sector and the high cost of living.

This article was first published in Saudi Gazette

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