Austerity, Saudi-style: cheap oil nudges Riyadh toward economic reform

In the Faisaliyah mall in central Riyadh, the call to midday prayers brings down the shutters on shops selling luxurious global brands and the basement mosque fills up. Customers are routinely searched at the entrance – a woman guard in a niqab, black abaya and white gloves sits by the metal detector. Cafes and restaurants have mixed “family sections” to ensure privacy. Harvey Nichols is having a holiday sale.

Business seems slow, though visitors look in vain for any serious sign of Saudi Arabia’s gathering economic crisis, born of the lowest oil revenues in decades and subsidy cuts to reduce a $98bn budget deficit – 15% of the country’s GDP. The price of petrol has just gone up by 60%, though it is still dirt cheap, and VAT and other taxes are planned – significant novelties in a country where most people have not known such things in their lifetimes.

“There isn’t much economic pressure here because we deal with rich people,” laughs Tamer, an affable Egyptian who lost his clerical job with a Saudi construction company and now sells timeshares in Dubai. Beyond the Faisaliyah’s marbled halls, however, many government projects have stopped, expenditure has been slashed and rents have risen sharply. The housing shortage is a major preoccupation.