Saudi Arabia’s stock market has suffered following the announcement of spending cuts in the kingdom's budget.
Saudi’s stock market dropped 3 per cent in early trading after sweeping cuts to government subsidies were announced following a record $98 billion deficit in 2015.
Petrochemical companies were worst hit by fears that a cut in government subsidies would push up costs. Markets were trading lower in Kuwait and Qatar.
Saudi Basic Industries, the biggest petrochemical producer, dropped more than 8 per cent while Saudi Kayan lost 4.8 per cent when the Saudi stock market opened. Both later recovered some losses.
In the budget statement late on Monday, the finance ministry said subsidies for water, electricity and petrol would be affected over the next five years as kingdom looks to cut spending.
The kingdom has traditionally kept prices low for residents as a social welfare measure.
Changes to VAT and an increase in taxes on soft drinks and tobacco are also planned.
Saudi Arabia's $98 billion 2015 deficit amounts to 15 per cent of its GDP. In his budget address, King Salman cited “the decrease in oil prices and many challenges”.
