- The Kingdom of Saudi Arabia promised to invest 600 billion dollars in the United States During President Donald Trump’s trip there. But the Kingdom is currently managing a deficit, and enhances its spending at the promised levels will be very difficult unless the price of oil rises – which leads to the integration of Trump mathematics.
If one thing that President Donald Trump loves nearly large economic deals, they are low gas prices.
His current journey to the Gulf states is to bring these two goals in the conflict.
The administration has a description An investment from the Kingdom of Saudi Arabia described as $ 600 billion, in one case, 1 trillion dollars.
It is a huge number: at a price of $ 1 trillion, the investment will be equivalent to the full value of the sovereign wealth of the Kingdom of Saudi Arabia, or GDP in the country. In order for the nation to maintain this level of investing in the United States in the long run, it is likely to require long-distance walking currently low oil prices-a possibility of definitely anger Trump.
“The number is impressive, but its importance will eventually depend on the depth, schedule and oil price,” John, John SfakianakisThe chief economist and head of research at the Gulf Research Center in Riyadh said, luck. “Unless oil revenues rise, financing such obligations will lead to a general financing unless they are wisely managed. “
Oil is currently about 60 % of the Kingdom’s revenues, according to Gulf News.
“These pledges should face reality because they are already big. luck In an email. “From our point of view, the opposite winds of public financial resources from low energy prices and focus on local vision priorities 2030 means that the declared pledges will not be achieved in part only during the time frame for a period of four years.” (Vision 2030 aims to diversify the Saudi economy through huge public business projects, which Assign Up to $ 1.5 trillion.)
In order to break even when spending, Saudi state needs to be at least $ 96 for the oil, Bloomberg estimated. (last Estimates Put the number above $ 100 barrel.)
Brent raw, the international standard, is currently about $ 65 a barrel. This price was $ 79 in January, when Trump took office – a number the president believed was very high.
And he said to World Economic Forum On January 23. “You have to lower it, which, frankly, I was surprised that they did not do before the elections,” Trump said. “This did not show much love.”
Perhaps this love was a few months late, but it arrived, as OPEC announced the increase in production for the month of May and June, which paid the price of oil. The Saudi -like step (AN) is an undeclared gift to Trump, ” books Reuters, column writer Ron Bosso. Cleiton Segel, an older colleague in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, wrote on Wednesday that low gasoline prices mean that Trump has already recorded his great Saudi victory.
How long this price remains low to be seen.
Economic question No. 600 billion dollars
Many observers have suspected the $ 600 billion deal, describing it greatly. A Fact paper White House investments at the White House provide $ 282 billion, including $ 142 billion US weapons sales.
Paul Donovan, chief economist in global wealth management at UBS, books This week, the $ 600 billion plan “has a sensation of rotation, which does not necessarily change anything in reality. The advertisement does not require economic expectations.”
When it comes to $ 1 trillion in spending that Trump sought this, Ziad Daoud, BloombergThe chief economist said emerging markets, ” New York Times It was “out of reach.”
As it is, $ 600 billion is about 60 % of GDP in the Kingdom of Saudi Arabia and about 40 % of its current foreign assets, according to Tim Calin, a visiting colleague at the Arab Gulf States Institute and the former International Monetary Fund official. The meeting of this goal will require the country to die part of the foreign imports that it is sources from the United States over the next four years, Calin. books Earlier this year. While “Saudi investment is likely to grow in the United States, the size of the commitment seems very large.”
The obligation is the 2030 vision, which is an ambitious program for public works and economic diversification that Assign It was estimated at $ 1.3 trillion. These local demands pushed the Kingdom to Anti -spending deficit. Now add a decrease in the price of oil and the Kingdom of Saudi Arabia Disability Farouk Sousa of Goldman Sachs Soussa, by the end of this year, said to $ 70 billion. CNBC.
Certainly, the Kingdom of Saudi Arabia can bear some short -term spending in the short term, but it is likely to look forward to bridging the gap, either by lowering projects, selling assets or raising taxes.
Huge numbers, small details
Trump claims that the Kingdom of Saudi Arabia bought $ 450 billion in American exports during his first term, a number carried by Calin, from the Institute of Arab Gulf States, He says It was not “anywhere near.”
Trump was not the first to be the first public employee to announce only a hateful public project for disappointment because of reality. Politicians love to describe their construction that is a friendly intention, so much Detection these Claims He has Become Cotton industry.
“Let’s be honest, the ads are always in the end. I don’t think the actual effect is like a great title. But the mark is positive.” luck. Johnson was suggested by Trump’s good executives by announcing development deals in the swing states, even if these promises have later become. “Hurt“
During the first period of Trump, “there was a lot of promises that did not get fruits,” Johnson said. “But this is a kind of nature of work: if you are making big investments, it will not happen overnight.”
This story was originally shown on Fortune.com
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