A survey showed on September 1, 2020, presented that the non-oil private sector of Saudi Arabia’s economy saw a renewed drop in business conditions in August 2020, after stabilizing in July 2020.

The economy fell back into a downturn as firms registered a solid drop in new business, partially attributed to the hike in value-added tax (VAT) charges and ongoing social distancing measures due to the coronavirus pandemic.

Saudi Arabia, the world’s largest oil exporter, tripled VAT in July to 15% to boost state coffers badly hit by low oil prices.

The business activity and employment declined, while the tax rate change led to the sharpest increase in output charges for 11 years.

The headline seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) fell to 48.8 in August from the neutral 50 thresholds in July, signaling a renewed deterioration in the non-oil private sector economy.

Faster reductions in business activity, new work, and employment were the main factors leading to a decline in the headline PMI during June.

IHS Markit’s Economist, David OWEN said: “The lasting effects of the COVID-19 crisis were also apparent, with plenty of businesses noting that consumer confidence remained weak despite efforts to reopen the economy. Some areas saw an improvement though, especially with firms highlighting a pick-up in tourism”.

“New business was down solidly from July, as several firms commented that the sharp uptick in prices kept some customers away from markets,” he said.

To stem the impact of the pandemic on small and medium-sized enterprises, the central bank this week extended deferrals on bank payments for three more months.

This article was edited using the data from the Markiteconomics.com, Reuters.com, Investing.com, and English.mubasher.info.