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International Monetary Fund Report Highlights Prosperity and Growth in Saudi Arabia’s Economy

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The International Monetary Fund Reports Positive Growth in Saudi Arabia

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Introduction

The International Monetary Fund (IMF) has released a report on the Kingdom of Saudi Arabia, stating that the country is experiencing a period of prosperity and growth. This report follows the completion of Article IV discussions and consultations with the Kingdom.

Economic Transformation and Accelerated Reforms

The IMF report highlights that Saudi Arabia’s economic transformation is progressing rapidly, especially since the launch of the Saudi Vision 2030 reform plan in 2016. Despite the economic slowdown caused by the COVID-19 pandemic and limited impact from external factors like the Ukrainian crisis and global financial conditions, the Saudi economy remains resilient.

Fastest Growing Economy in the G20

The IMF report states that Saudi Arabia is the fastest growing economy among the G20 countries, with a growth rate of 8.7% compared to the previous year. This growth is attributed to a 16% increase in crude oil production and a 4.8% increase in non-oil GDP.

Importance of Reforms and Inclusive Growth

The IMF emphasizes the importance of maintaining momentum in reforms to achieve inclusive growth and enhance the resilience of the Saudi economy. The report highlights the significant contribution of non-oil private investment, driven by several mega-projects, to high levels of private consumption. It also predicts strong non-oil GDP growth, reaching an average of 4.9% in 2023.

Improvements in Unemployment and Inflation

The IMF report predicts a decline in the Saudi unemployment rate to its lowest historical level, reaching 8% in 2022. It also notes a significant decrease in youth unemployment to 16.8% in 2022, attributed to strong economic growth. The report praises initiatives to increase women’s labor market participation, surpassing the target set by Saudi Vision 2030.

Despite global inflation rates reaching high levels, Saudi Arabia has managed to contain the annual inflation rate at 2.5% through domestic support and price caps on certain products. The report also highlights the strong development of the banking system in the Kingdom.

Progress in Diversification and Fiscal Stability

Saudi Arabia has made progress in diversifying its economy and reducing dependence on oil. Non-oil revenues have doubled, and the government expects to maintain close-to-balanced financial accounts over the medium term. The report mentions the upgrade of the Kingdom’s sovereign credit rating by international credit rating agencies, which will facilitate access to global investment markets.

Investment Program and Financial Inclusion

The IMF acknowledges the competitiveness reforms and major investment program, including investments from the Public Investment Fund, which align the external position with economic fundamentals. The implementation of a medium-term budget program will support fiscal consolidation. The report also recognizes the positive impact of digital developments on financial inclusion, sector resilience, and public sector efficiency.

Low Public Debt and Borrowing Strategy

Saudi Arabia’s level of public debt remains low at 24% of GDP, and the IMF estimates that it can be sustained at this acceptable level. The report highlights the government’s borrowing strategy, which aims to extend debt maturities, lower refinancing costs, and establish a yield curve in domestic and international markets.

Investment System and Governance

The IMF expects that the new investment system, currently open for public consultation, will create an environment of equal opportunity for both Saudi and non-Saudi investors. It emphasizes the importance of protecting investor rights and maintaining transparency. The report also acknowledges Saudi Arabia’s efforts in strengthening governance, combating corruption, and addressing climate change.

Conclusion

In conclusion, the IMF’s report on Saudi Arabia highlights the country’s positive economic growth, ongoing reforms, diversification efforts, and fiscal stability. The Kingdom’s strong performance and resilience are attributed to various factors, including the Saudi Vision 2030 reform plan and the successful containment of inflation. Continued reforms and investments will further support the country’s economic prosperity.

Sources

Source: Al-Ektisadiya + SPA

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