OPEC member’s decision last week to cut oil output won’t help Saudi Arabia in the long term. The kingdom problems run far deeper and even at $50 a barrel, it will face a large deficit requiring more borrowing and subsidies cuts that will bring more pain on a population accustomed to easy life.
Saudi Arabia has managed to escape the “Arab Spring” using its oil profit reserves and a strong and experienced leadership. Today the kingdom is in a different situation as it faces growing pressures that might eventually lead to political instability. Economic uncertainty grows as cuts to subsidies and salaries impact Saudis that are accustomed to the prosperity brought by oil while the government has been running massive deficits over the last two years. Salaries are going down and costs are going up. So is the frustration of ordinary people. Construction workers torched buses during demonstrations in the holy city of Mecca because they had not been paid in months.
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