Economic Brief – Saudi Arabia COVID-19 Policy Response and Budgetary Performance During Q1 2020 – March 2020

The global economy has witnessed a dramatic shift in supply and demand dynamics resulting from COVID-19 that has negatively impacted the full spectrum of economic activities. The exponential growth of this pandemic has led economies to grapple with significant social and economic changes in a very short amount of time. Governments are facing the daunting task of preserving human life while still maintaining their citizens’ livelihoods. There has been much debate as to how the economic recovery will look once the effects of COVID-19 subside. In the early phases of the pandemic, the debate centered around whether a “V” or “U” and even a “W” shaped recovery was in store for the global economy. However, the current consensus is that the road to recovery will not be rapid but prolonged over the course of several years. In its recent World Economic Outlook April 2020, the IMF forecasts its baseline scenario for global GDP to contract by 3 percent in 2020 followed by a 5.8 percent rebound in 2021. However, the IMF stated that growth in 2021 is largely dependent on COVID-19 mitigation efforts that will subside throughout the second half of 2020. Downside risks must also be factored as the potential for an elongated or resurfacing of the pandemic would further cripple recovery efforts. In such a scenario, the IMF suggests that global economic output could further decelerate by as much as 8 percent compared to the 2021 baseline.