Saudi Arabia to Guarantee Salaries to Support Virus-Hit Firms
Saudi Arabia to Guarantee Salaries to Support Virus-Hit Firms
(Bloomberg) --
Saudi Arabia moved to avert large-scale job layoffs during the coronavirus pandemic by pledging to help struggling companies with wages, in perhaps the kingdom’s most significant measure so far to limit damage to the private sector.
Instead of terminating contracts of Saudi citizens, business owners can request monthly compensation amounting to 60% of the employee’s salary for the next three months, state-run Saudi Press Agency reported Friday, citing a royal order. The measure is set to take effect this month and around 1.2 million Saudis might qualify.
The government has vowed to stimulate the economy while making savings of 50 billion riyals ($13.3 billion) from budgeted spending this year. Coming in tandem, the crash in oil prices and the virus have wreaked havoc on public finances, and the kingdom could run a budget deficit of 23% of gross domestic product if Brent crude falls to $20, according to JPMorgan Chase & Co. estimates.
| What Our Economists |
|---|
“Of all of the stimulus measures announced, this is the most significant so far. It’s a step in the right direction: it could help companies to stay afloat and prevent a mass layoff of workers. We’ll see if the coverage will at some point extend to non-Saudi employees.” -- Ziad Daoud Click here for more |
Amid the global carnage, Crown Prince Mohammed bin Salman’s economic transformation plan -- dubbed “Vision 2030” -- could face deep budget cuts.
©2020 Bloomberg L.P.