Saudi Arabia Macroeconomic Developments
- The IMF completed its Article IV consultation with Saudi Arabia and forecasts 2.4 percent GDP growth for 2021, including 4.3 percent growth in non-oil GDP. Annual inflation is expected to reach 3.2 percent, reflecting both the VAT increase and rising food and energy prices. The Fund praised several reforms including a decisive response to the COVID-19 pandemic, the maintenance of strong fiscal buffers, the VAT increase, and regulatory changes such as the bankruptcy law that improved the ease of doing business in the Kingdom. The full report can be read here.
- Saudi Arabia announced a cap on domestic gasoline prices for July for the first time since 2018. Fuel prices will be capped at June prices between SAR2.18 ($0.58) and SAR2.33 ($0.62) per liter depending on grade. The move follows rising global gasoline prices and reaffirms the Kingdom’s commitment to reduce subsidies in the energy sector.
- Saudi Arabia’s reserve assets declined 0.8 percent MoM and 2.6 percent YoY in May to reach SAR1.6 trillion ($437 billion). The Kingdom drew down investments in foreign securities by 1.2 percent and foreign currency by 0.3 percent. Holdings in special drawing rights (SDR) and IMF reserve positions marginally increased.
