The International Monetary Fund (IMF) maintained its positive outlook for the Saudi economy, given the non-oil strong growth momentum, which is expected to to grow at an average five percent in 2023.
The Fund indicated that the current account improved to a ten-year high surplus in 2022 amid higher oil prices and stepped-up production.
The current GDP surplus reached 13.6 percent, and some sectors exceeded the targets under Vision 2030.
Currency strength
In its latest Article IV, the Fund said that the "inflation rate remains low and appears to be easing."
It noted that inflation will be contained in 2023, and at "2.8 percent, the average CPI will be slightly higher than in 2022, even though a strong currency, subsidies, and gasoline price cap offset inflationary pressures from diminishing labor market slack and a booming non-oil economy."
The output gap is estimated to have closed during 2022, and the momentum is continuing in 2023, with nowcasting estimates "suggesting non-oil growth above 5 percent in H1 2023."
The fiscal surplus in 2022 -the first since 2013- was halved relative to the staff's initial projection of 5.5 percent of GDP.
It mainly reflects "increases in goods and services and capital spending."
Public debt
At 23 percent of GDP, public debt is low and sustainable, with fiscal space available to address potential headwinds.
The IMF reported that the "exchange rate peg to the US dollar remains appropriate given the current economic structure. It is a policy that has been serving the country well to support monetary stability."
Mortgage loans
The report pointed out that despite the mortgage boom in recent years, banking sector risks from the housing sector are assessed to be limited so far.
It stated that "achieving strong, sustained, inclusive, and greener growth" and implementing the "Vision 2030 reform agenda is continuing unimpeded towards a productive and green economy."
A "mid-way stocktaking of the objectives set under Vision 2030 has identified progress on digitalization, the regulatory and business environment, female labor force participation, and higher private sector investment, in some cases with targets set for 2030 already surpassed."
Renewable energy
The mission "welcomes ongoing plans to increase renewable energy by an additional 2.1 GW capacity by 2024, generate savings through efficiency programs (tarshid), deploy carbon Capture, Usage, and Storage technologies, and become the world's leading hydrogen exporter."
The Fund stated that the Saudi Central Bank (SAMA) intervention has helped alleviate liquidity strains as interest rate spreads have now normalized to their historical averages.
The Saudi unemployment rate is at a historical low.
Amid an increase in labor force participation, total unemployment dropped to 4.8 percent by end-2022, from nine percent during Covid, reflecting an increase in Saudi workers in the private sector and expatriate workers (mainly in the construction and agricultural sector) rising back above pre-Covid levels.
The fastest-growing economy
According to the Fund, the Kingdom was the fastest-growing G20 economy in 2022.
"Overall growth reached 8.7 percent, reflecting both strong oil production and a 4.8 percent non-oil GDP growth driven by robust private consumption and non-oil private investment, including giga projects."
The importance of initiatives
Experts pointed out that initiatives and programs undertaken by the Saudi government are essential to developing the non-oil sector, which will positively impact the national economy, expecting it to witness significant growth in the next stage.
Project implementation
Economics Professor Salem Baajaja at the University of Jeddah told Asharq Al-Awsat that the IMF confirmed the rapid growth of the Saudi economy among the G20 economies, considering the Kingdom's plans of Vision 2030 toward a prosperous economy.
Baajaja indicated that Saudi Arabia's domestic product increased by 8.7 percent due to the increase in oil and non-oil revenues together, yet consumer spending increased, reflecting the Saudi economy's growth.
Financial stability
Economic analyst Abdulrahman al-Jubairi explained that the Fund's expectations for the five percent growth projection of the non-oil sector in Saudi Arabia confirm the government's role in diversifying income sources and promoting private sector investments.
Jubairi told Asharq Al-Awsat that the Central Bank is making significant efforts to maintain financial stability, raise solvency, and promote technical infrastructure.
He added that the Kingdom could support the banking system due to its large foreign reserves and access to global markets, which reflected positively on the data and indicators of exports from international organizations.
