All signs are there indicating of an economic collapse in Saudi.
We had argued on 1 Aug 2018 that millions have left Saudi, giant corporations have shut, hundreds of royal family members are in jail, water, electricity and petrol prices have doubled or tripled, visas for expats are extremely hard to get or not possible in dozens of jobs, FDI has plunged, Saudis themselves don’t wish to invest in Saudi yet cannot take out money from Saudi etc.
Yesterday, Bloomberg has published an article about the oncoming implosion.
Money outflows and viability of investment is the key problem in Saudi that scares the foreign investors.
"According to research by JPMorgan, capital outflows of residents in Saudi Arabia are projected at $65 billion in 2018, or 8.4 percent of GDP. This is less than the $80 billion lost in 2017, but a sign of a continued bleed."
“For private-sector growth to take place, capital needs to feel safe, and investors need legal guarantees to protect them. But this has not happened. Instead, the business cycle continues to be fueled by government project-spending tied to oil revenues: Government deposits appear in local banks, then loans go out to favored private-sector contractors.”
The sudden, forceful and undiplomatic response towards Canada will scare most die-hard investors from any of their future plans to invest anything in Saudi.
Stability of Govt policies is one of the most important considerations when investing in any foreign country of which Saudi is showing no signs of. This has led to an 81.3% plunge in FDI in 2017 and is set to get even worse in 2018.
Saudis have always had a 30 days exit rule on expats whose jobs are lost or get deported for any reason.
For the very first time, thousands of Saudis themselves are facing the impact of leaving a country within 30 days after staying in a country for several years.
This is what a Saudi student wrote in CBC, Canada news on 16 Aug 2018.
“How is our eviction of any benefit to this political situation? This can't be right! I'm not a slave! They don't own me?What does this even have to do with politics? How is Canada being punished by this? We, the Saudis living here, are the ones punished! What about the hospital patients?
Saudis are starting to share details on cargo companies, flights, when they're leaving, where they're going. It's a sad situation. Everyone's moving somewhere, and this month is probably the last month I will be able to hang with the community we formed throughout the years. I still have many Canadian friends who are very supportive. But why do I have to choose between two devastating choices? Why did it have to come to this? All because of a tweet, and the ego of a 32-year-old man.”
Approx. 20,000 Saudis living, working and studying in Canada have had their lives disrupted badly and needed to leave Canada immediately before end of Aug 2018.
Canadian businesses will eventually find new customers but can Saudi win the support of large countries once again?
No Saudi business is being done with Germany (82m pop.), no business is being done with Canada (37m pop.), no business is being done with Qatar (richest country per capita in the world, 2.7m pop.), no business is being done with Yemen (28m pop.) or Iran (85m pop.).
Why has Saudi become self destructive (at a time when oil prices have been low for several years) that instead of seeking support, it is creating an atmosphere of animosity with the entire world that will make the best of countries run away and shudder at any thought of investing in Saudi?
Although, we have been predicting a collapse of the entire GCC region (especially Saudi and UAE) since 2015, things have worsened a lot with many billionaires in jail and many billionaires who have run away. Every single month has brought a bigger disaster than the previous month since Jan 2015.
Now some other thinkers are in agreement with us as well.
Furthermore, one of the most difficult decisions that lies ahead for Saudi and UAE is to accept Chinese Yuan for the sale of oil along with the simultaneous depeg of their currency from the US Dollar.
Since 2015, we have predicted that this monumental decision will occur in 2018, however, due to the deal of Trump with Saudis to arrest hundreds of Saudi billionaires and royal family members in lieu of hiking the price of oil, our projection got delayed by 6-12 months.
The time is coming when Saudi & UAE will need to depeg (especially given the scenario that currencies of every single country in the world, who are not pegged to USD) have depreciated (over the last 6 months to 5 year period) by 50% to 300% making Middle East the MOST EXPENSIVE place in the world to live or do business in.
This will cause untold miseries and will not allow any effort by the Govt to succeed, and after that depeg from USD (in order to depreciate and ease pressure on businesses) as well as accepting Chinese Yuan will become the only solution, which is the single biggest reason that will tear apart the entire Middle East while transitioning for support between the 2 biggest elephant size economies from USA to China.
In addition, we have unwarranted fights between Saudi and Canada/Germany/Qatar/Yemen/ Iran etc that will bring so much economic pain on 20-22m Saudis and 8-10m expat residents which is totally self inflicted, as the writer of the above article said, for the sake of ego of one man.
This self inflicted fight with Qatar, Germany and now Canada is occurring at the worst time possible and sending a terrible signal to the entire world. But the worst is yet to come.
No one could have made it any worse for GCC but here we are, in 2018 at the cross roads of historic change where the transition of GCC support by America needs to be shifted to China/Russia axis and there is absolutely no easy way for Saudi to do this.
It involves oil, it involves USD and the move towards a China dominated century.
None of these are acceptable to USA hence the stress on the country in the middle of it all - Saudi.
Given so much stress, it is inexplicable that the Saudi Crown Prince would create more self inflicted problems with Germany, Canada, Qatar, Yemen and Iran etc at such a difficult time of a historical transition period.
Most oil producing countries except Saudi, USA and UAE (and Kuwait, Bahrain etc) are already accepting Chinese Yuan.
Only question remains: When will Saudi depeg from the US dollar and when will they start accepting Chinese yuan for sale of their oil?
When this decision is made by Saudi, it will shake the entire world to it's core.
Meanwhile, good luck to all Saudis and all the remainder expats in Saudi.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.