Saudi Austerity Could Spark Social Unrest

Four years after the Arab Spring, the lynchpin of OPEC faces more social unrest, as Saudis digest unaccustomed austerity amid plummeting oil prices, costly military intervention in Yemen and increased tension with Iran.

The ultra-hardline regime in Saudi Arabia launched an austerity budget late last year to help combat a ballooning deficit. It is even considering listing shares in its ginormous state-owned oil company, Saudi Aramco, in a bid to raise funds.

The curtailment of mass subsidies on utilities and lavish public spending marks a change, as the Arab state has previously been generous in redistributing its massive oil wealth — partly as a means to stave off public restiveness with absolutist rule.

“With a decline in social spending and a reduction in subsidies comes the risk of rising domestic turmoil, as highlighted by the Arab Spring in 2011 when high inflation, lower growth and inequality resulted in mass demonstrations across the Middle East,” Alberto Gallo, head of global macro credit research, said in a research note last week.

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza