The slowing Saudi economy is having an effect on other Middle East countries, according to recent news reports from the region. Saudi Arabia’s central bank recently cut two of its key interest rates by 50 basis points as it battles the effects of the global financial crisis.
The country is key to the region’s overall economy and the move is seen as helping all Middle East countries. “When the Saudi economy slows down this much, that really hurts everybody,” John Sfakianakis, chief economist at the Saudi British Bank, said. “It is felt in the Middle East.”
While Saudi Arabia’s economy is heavily dependent on oil, it is also one of the more diversified countries in the region. With the price of oil falling and economic troubles hitting every sector, the country needs to be seen as leading the way. Economic growth in the kingdom has been approximately 5 percent for 2008 and is expected to fall to 1.9 percent, according to the most recent predictions. This will have an effect on all of the regional economies, as foreign investments, travel and trade will decrease.
Egypt’s prime minister said that the country would likely see lower foreign investments, as well as a drop in vital Suez Canal revenues, because of the world’s economic woes. A slowdown in growth in Saudi Arabia could undercut economic growth and strain government spending in Egypt. It will also affect property for sale in both Egypt and Saudi Arabia, as less people will have extra money available for investing.
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