Abu Dhabi: The record drop in oil prices from more than $110 per barrel in 2014 to less than $40 per barrel this year has forced the Saudi government to reform its economy and look beyond oil, analysts said on Monday.

“There is no doubt that low oil prices is the main reason why Saudi Arabia is undertaking reforms to diversify its economy. In the long run, the new measures announced by the government will benefit the economy,” said Edward Bell, commodity analyst from Emirates NBD.

As part of the new reforms announced on Monday, tourism will be encouraged and new industries will be set up.

“We have developed a case of oil addiction in Saudi Arabia,” Saudi Deputy Crown Prince Mohammad Bin Salman said in an interview to Al Arabiya Television. “I think by 2020, if oil stops we can survive,” he added.

The government is undertaking reforms as oil prices slump due to over production and weak demand.

In a landmark decision in December, the Saudi government cut subsidies and raised fuel prices by 50 per cent.

“Being dependent of just one source of income makes an economy incredible vulnerable to price shocks and makes forward planning very difficult,” said Ole Hansen, an analyst from Saxo Bank.

He said using the oil wealth to diversify is the only way forward for the economy to survive in the long term.

“A fast growing population and no history of paying tax and jobs making little or no meaning, requires changes in order to compete in the global market place.”

According to a report issued by the Organisation of the Petroleum Exporting Countries in December it may take many years for oil prices to recover and reach the level of more than $110 per barrel witnessed in June 2014,

The oil producers group expects the price of its basket of crudes to rise to $70 a barrel in 2020 and $95 a barrel in 2040.

Analysts predicted an average price of $40 in 2016 and $45 in 2017. Brent, the global benchmark was trading at less than $45 per barrel on Monday.

“The price of oil will bounce further as we move towards the end of 2016 and into 2017. Billions of dollars of capex cut will eventually change the focus in the market from oversupply to the potential lack of supply,” Hansen added.

In 2015, Saudi Arabia registered a budget deficit of 16 per cent of GDP and with government reforms announced December 2015, Saudi Arabia is expected to register a budget deficit of 13 per cent of GDP.