Fiscal consolidation in Saudi: lessons from history

The recent announcement of a scaling back of gigaprojects suggests that Saudi Arabia will be following the playbook of previous tightening episodes by focusing on cuts to capital expenditure. This will probably come alongside efforts to raise non-oil revenues. And the lesson from past tightening is that there’ll be a significant slowdown in growth in the non-oil economy. That said, if a period of low oil prices is the trigger for a renewed focus on structural reform, that could improve the Kingdom’s long-term prospects.