International Monetary Fund. Middle East and Central Asia Dept.
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
October 2015
DOI:
http://dx.doi.org/10.5089/9781513505077.002
ISBN:
9781513505077
ISSN:
1934-7685
Page:
85
This Selected Issues paper assesses the importance of oil and interest rate spillovers for Saudi Arabia. Oil prices have fallen by more than 40 percent since mid-2014 while the Federal Reserve is expected in the coming months to begin raising its policy rate at the beginning of a gradual tightening cycle. Given the importance of oil to the economy and the peg of the riyal to the U.S. dollar, these are two key developments for Saudi Arabia. Although a temporary drop in oil prices would likely have little effect on the economy and banks given the financial cushions that have been built-up, a longer-lasting period of low oil prices would have a more significant impact.
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