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 On Thursday, Salman ordered the immediate payment of two months of
bonus salary to all state employees and pension to retired
government workers, in a string of decrees which also reorganized
the economic policy-making apparatus.
The announcement did not give a monetary figure, but Saudi Arabia's
860 billion riyal ($229 billion) state budget plan for 2015 said
salaries, wages and allowances would comprise 50 percent of total
spending.
That implies the new payout, announced a week after Salman succeeded
his brother Abdullah as king, will be worth up to around 70 billion
riyals -- about 8 percent of the original budget, or 2.5 percent of
last year's gross domestic product.
Other benefits announced by Salman will increase spending further.
He ordered payments to students, grants to professional associations
and sports and literary clubs around the country, and 20 billion
riyals in spending to improve electricity and water services, though
it was not clear if the utility spending was part of a previously
announced plan.
A Reuters poll of economists earlier in January found them
predicting GDP growth of 3.2 percent this year, down from 3.6
percent in 2014, on the grounds that the plunge in oil prices would
cause the kingdom to slow some energy and petrochemical investments
and make the government more cautious about spending in general.
Salman's announcement on Thursday suggested the government remained
willing to spend heavily despite the hit to its oil revenues from
low prices, and that GDP growth this year might therefore be higher
than originally expected.
"I believe it will be growth-supportive -- especially on the
consumption side," said Monica Malik, chief economist at Abu Dhabi
Commercial Bank.
Saudi retail industry shares such as Jarir Marketing, United
Electronics and Fawaz Alhokair, plays on the kingdom's fast-growing
private consumption, may benefit.
Salman's announcement appeared to take a step back from a pledge in
the 2015 budget, which was announced in December when he was already
overseeing economic policy, to "rationalize" spending on public
salaries.
But it is in a long Saudi tradition of welfare handouts at times of
political transition or tension. The 2015 budget plan projected a
deficit of 145 billion riyals; the actual deficit now looks likely
to be much larger, but with government reserves at the central bank
totaling some 900 billion riyals, Riyadh can easily cover such
shortfalls for now.
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ECONOMIC COUNCIL
Salman may intend to recoup some of the costs of his handout through
economic and bureaucratic reforms.
Thursday's decrees kept the identity of key economic ministers
unchanged, suggesting to many observers that major, politically
sensitive reforms -- such as cutting energy subsidies, or large tax
shifts -- are not on the cards for now.
"With the oil, economic and finance portfolios remaining steady, I
do not expect to see wider change in policy," said Malik.
But Salman replaced many other ministers including
telecommunications, agriculture and the civil service, suggesting he
may seek changes in the way those ministries operate. Economy
minister Muhammad al-Jasser said last week that the next reform
drive should focus on efficient administration.
Salman appeared to be seeking bureaucratic efficiency on Thursday
when he abolished 12 committees and councils, creating a new Council
of Economic and Development Affairs to substitute for some of them.
The new council, chaired by Salman's son Prince Mohammed bin Salman,
who is only 34, may give the king a platform to push controversial
economic reforms in the future if he wishes.
(Additional reporting by Angus McDowall in Riyadh; Editing by Andrew
Heavens)
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