On December 28th, Saudi Arabia announced spending cuts in the 2016 budget, to subsidies reform and privatization, to contain the growing deficits caused by low oil prices for a long time.
The last two years, Saudi Arabia has maintained high levels of oil production, trying to shale oil more expensive manufacturers, in order to maintain their market share. But, this year from Saudi oil revenue fell 23% to 444.5 billion Saudi riyal ($118.6 billion), the deficit ballooned to 367 billion Saudi riyal ($97.9 billion), equivalent to 15% of GDP.
May arise in order to prevent future financial crises, the Saudi ministry of finance on December 28, confirmed the broad reform, including "series of business and economic activities" privatisation plans.
Saudi Treasury added that the government will "over the next five years to gradually change the sources of energy, water and electricity prices to optimize efficiency, and to minimize these reforms" to the low-income citizens and the negative impact of commercial sector competitiveness ".
The first batch of reform into effect since December 29, including the measures of improving the gasoline prices. In addition, Saudi Arabia will also raise electricity prices to the most affluent consumers, slightly raise water prices to all users, and adjust the industrial users of energy prices.
Saudi Arabia's austerity and reform plan is a response to profligate spending in the past 10 years, it rang alarm bells in the business world. Cause the government to defer spending cuts have shock in the business world.
Pose a threat in the islamic extremist group, for Saudi citizens and substantial reform of the social contract between the Saudi royal family could also trigger disputes.
This year, the real GDP is forecast to rise 3.35% in Saudi Arabia, the private sector will grow by 3.74%.
"We expect the Saudi real GDP growth will slow sharply in 2016, although still be positive." ABU dhabi commercial bank's chief economist, monica malik said, "as government spending into the overall economy, Saudi Arabia's non-oil GDP is expected to slow."