Moody’s credit rating agency said that the measures announced by Saudi Arabia yesterday will help offset a portion of the lost revenues resulting from the significant decline in oil prices and the decline in oil production resulting from the OPEC Plus agreement.

Alex Bergesy, vice president and chief analyst at the agency, said in a report that Al Arabiya Net received a copy of, that these measures highlight Saudi Arabia’s ability to deal with economic shocks.

He explained that reducing the new spending, with those announced last March, and the other that was approved in the 2020 budget, is equivalent to about 8% of the kingdom’s GDP.

At the same time, the decision to increase the value-added tax to 15% will contribute to increasing the country’s revenues by about 5% of GDP annually, according to Barjisi.

In the short term, Moody’s chief analyst believes that the increase in value-added tax will negatively affect sustainable consumption rates, and that this will also reinforce the negative economic impact of lower oil prices, and the measures taken to combat the Corona epidemic.

Saudi Arabia announced a package of measures, including raising the tax and stopping the cost of living allowance. The kingdom decided to stop the cost of living allowance starting from next June, and to raise the value-added tax rate from 5% to 15% starting from July, according to what the Minister of Finance and Minister of Economy and Planning Mohamed Al-Jadaan announced on Monday.

He indicated, in yesterday’s statements, that raising the value-added tax will not have any impact on revenue this year as a result of lower consumer spending during the curfew period, expecting that revenues will be positively affected by the tax increase in 2021 and 2022.

SOURCE : SAUDI24