Saudi consumer spending to remain flat until 2020: Al Rajhi Capital

The total consumer spending in Saudi Arabia is expected to remain flat over 2017-2020 given the impact of government's multiple reform initiatives, Al Rajhi Capital said in a new report on Sunday.

Consumer spending is expected to increase by a mere 3.8 percent over the four-year period, following the rollout of reforms such as value-added tax (VAT), expatriate dependents' levy, increase in utility and gasoline prices, among others.

Without reforms, total consumer spending would have grown by 9 percent, the research firm noted.

According to Al Rajhi, the Saudi citizens account program and cost of living allowances for 2018 alone will support Saudi households spending to grow by an average 8.2 percent over 2017-2020. The program will also shield 70 percent of Saudi households from the impact of reforms.

However, non-Saudi households spending will fall by 13.5 percent over the period, following the introduction of dependents' levy, VAT, new utility rates and foreigners' non-eligibility for government's support programs.

"Since higher spending by Saudi households will be negated by lower spending by non-Saudi households, total consumer spending is set to remain flat," the report said.

Meanwhile, purchase of new vehicles, recreation and culture (mainly package holidays), furniture and furnishings, and restaurants will face the brunt of declining consumer spend.

The slowdown will also push consumer sector companies into consolidation and focus on market share gains, given the sheer absence of market growth.