Saudi Arabia’s economy is unfazed by geopolitical turmoil in the region, its finance minister said Wednesday when asked about intensifying conflicts with its neighbors.
“There has been a lot of turbulence around the world. If the economy is going be crippled just because a terrorist group is in access of one or two hundred missiles, that is a serious problem,” Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan told CNBC’s Hadley Gamble in Riyadh.
“All our reforms have been done while terrorist activities are taking place on our border, trying to impact our economy, and we are saying no — we are going to defend our territory, but that will not distract us from pushing social, legal and financial reforms.”
The minister was referring to the broad set of economic reformsunderway in the kingdom, most notably “Vision 2030,” a large-scale initiative aimed at expanding the private sector and diversifying the country’s oil-dependent economy away from hydrocarbons. Oil currently accounts for roughly 87 percent of Saudi budget revenues and 90 percent of export earnings.
Regional observers have questioned the viability of such a reform agenda amid fluctuating oil prices and geopolitical conflicts like Saudi Arabia’s military involvement in the Yemeni civil war and its escalating tensions with regional arch-rival Iran.
‘Economy was not impacted at all’
Earlier this month, Saudi’s southern city of Jizan was the target of missile fire by Yemen’s Houthi rebels, which it says was successfully intercepted. The mid-April strike followed a missile attack in March that was the Yemeni rebels’ largest cross-border offensive in its three-year war thus far, sending seven long-range rockets toward Riyadh.
“We’ve received in the last two years or so about 100-plus missiles, all have been intercepted successfully, and our economy was not impacted at all,” Al-Jadaan said.
“It is important to note that this region has been through a lot of waves of geopolitical tensions … Our economies have weathered this without really any significant impact,” he added.
“Reactions from leaders across the world have been very supportive of Saudi Arabia’s position, so I’m very comfortable with the geopolitical situation.”
The International Monetary Fund (IMF) projects Saudi growth at 1.8 percent for 2018 after suffering its first contraction last year since 2009. Oil prices, seeing multi-year highs, are expected to boost the economy. But the kingdom would need oil to hit averages of $85 to $87 a barrel to balance its budget, the IMF said. Its current deficit is projected at 7.3 of GDP for 2018, and it aims to balance the budget by 2030.
Missile strikes and Yemen
The Saudi government says Houthi rebels have fired at least 116 missiles at the kingdom since it went to war in Yemen in 2015, and claims that all have been intercepted.
The missile launches were in response to Saudi Arabia’s airstrikes on the impoverished country, which began in 2015 when the Houthis, a minority Shia sect, gained control of much of eastern Yemen and territory along the Saudi border after overthrowing its President Abdrabbuh Mansour Hadi in late 2014. Saudi claims its involvement is in support of the president, who it seeks to put back in power.
The Houthis are being bolstered by Shia ally Iran in the form of advanced weaponry and military advisors. Saudi Crown Prince Mohammed Bin Salman has accused the Islamic Republic of “direct military aggression,” ramping up the stakes between the longtime adversaries. Iran denies it supplied missiles to Yemen.
Last March marked the third year of Saudi Arabia’s involvement in Yemen’s bloody civil war, where its aerial bombing campaign has been widely criticized as indiscriminate and in violation of international law. The protracted conflict has killed more than 10,000 people and displaced 3 million, according to the UN.