Saudi Arabia canceled bonus payments for state employees and cut ministers’ salaries by 20 percent, its latest steps to rein in a budget deficit that ballooned amid the oil price slump.
The government also curbed allowances for state employees and pared salaries of members of the Shura Council, which advises the monarchy, by 15 percent, the official Saudi Press Agency reported, citing a statement after the weekly Cabinet meeting and royal decrees.
The decision affects bonus payments for the lunar year that ends this month, the agency said.
Under Deputy Crown Prince Mohammed bin Salman, the world’s biggest oil exporter is seeking to tame a budget shortfall that expanded to 16 percent of GDP last year, the highest among the world’s 20 biggest economies. The government has delayed payments owed to contractors and started cutting fuel subsidies as it tries to manage lower oil prices.
“Spending on wages soared as oil prices boomed,” Simon Williams, HSBC Holdings PLC’s London-based chief economist for Central and Eastern Europe, the Middle East and North Africa, said in response to e-mailed questions.
With the deficit set to run above 10 percent of GDP for a second year in succession, “that era is over; wage spending has to be cut,” Williams said.
Lower oil prices and government austerity have started to impact the economy, with growth forecast to slow to 1.1 percent this year, the lowest level since 2009, according to data compiled by Bloomberg. Consumer spending has been hit by government’s efforts to lower the deficit.
Monday’s announcements made no mention of how much the cuts would save. Saudi Arabia was weighing plans to cancel more than US$20 billion of projects and slash ministry budgets by a quarter to repair its finances, people familiar with the matter said earlier this month.
There are also plans to sell the kingdom’s first international bond, which could raise more than US$10 billion, according to people aware of the plans. Authorities set up the National Project Management Office last year to control capital spending and ensure that government projects are carried out efficiently.
“This is clearly a sign to the people that the government is tightening its belt” and that it sees low oil revenues continuing for some time, said Paul Sullivan, an adjunct professor of security studies at Georgetown University in Washington.
“It may prompt some to move to the private sector, but don’t expect an exodus out of higher paying solid government jobs to riskier, lower paying private-sector jobs,” he said.
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
United Microelectronics Corp (UMC, 聯電) expects its addressable market to grow by a low single-digit percentage this year, lower than the overall foundry industry’s 15 percent expansion and the global semiconductor industry’s 10 percent growth, the contract chipmaker said yesterday after reporting the worst profit in four-and-a-half years in the fourth quarter of last year. Growth would be fueled by demand for artificial intelligence (AI) servers, a moderate recovery in consumer electronics and an increase in semiconductor content, UMC said. “UMC’s goal is to outgrow our addressable market while maintaining our structural profitability,” UMC copresident Jason Wang (王石) told an online earnings
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said
RSS