Following the International Monetary Fund (IMF)’s latest Article IV consultation, which lasted from May 23 through June 6, the organization has given Saudi Arabia a positive outlook in the short and medium-term, citing the country’s continued economic recovery, containment of inflation, and “robust external economic position.” The IMF expects Saudi Arabia’s GDP to grow 7.6 percent in 2022, with growth in the non-oil sector rising to 4.2 percent. Saudi Arabia’s current account surplus will likely grow to 17.4 percent of GDP in 2022, its highest since 2013. In addition, overall inflation in the country is expected to remain at 2.8 percent, according to the IMF.
IMF experts also predicted that the country’s debt-to-GDP ratio will decline this year, while its budget surplus will reach 5.6 percent of GDP in 2022. The IMF further noted Saudi Arabia’s increased labor force participation rate, fueled by more women entering the workforce. Unemployment since 2020 has dropped 1.6 percent to 11 percent. The IMF also cited Vision 2030 as a strong driver for sustainable growth, noting the Saudi public and private sector’s investments in blue and green hydrogen production and R&D efforts focused on the concept of a circular carbon economy.
The Kingdom’s success in handling the COVID-19 pandemic, plus its implementation of structural reforms, have helped it witness a sustained, comprehensive economic recovery since 2020. The IMF also expects the Kingdom’s economy to avoid the risks resulting from the invasion of Ukraine and ongoing monetary policy tightening in advanced economies. The IMF concluded its consultation by stating that “the mission welcomes the Kingdom’s commitment to fiscal sustainability and efforts to avoid procyclicality by setting a spending ceiling that would be delinked from oil price fluctuations.”
Albara’a Alwazir, Director of Economic Research at the USSBC, had the following to say about the IMF’s latest positive outlook on the Saudi Economy:
“We are witnessing economic policies implemented by Saudi Arabia that prioritize fiscal sustainability while elevating the private sector’s role. The strength of these policies are now bearing fruit and current economic conditions bode well for the expansion of the Kingdom’s diversification strategy in the medium to long-term.”