IMF: Economic Reforms in Saudi Arabia Yield Positive Results
Economic reforms underway in Saudi Arabia have started to yield “positive results,” the International Monetary Fund (IMF) said on Wednesday.
“Reforms to the capital markets, legal framework, and business environment are progressing well,” the IMF said. “Non-oil growth has picked-up, female labor force participation and employment have increased,” it added.
The Saudi Ministry of Finance (MOF) welcomed the statement released by the IMF mission that visited the Kingdom in May for Article IV consultations. Finance Minister Mohammed al-Jadaan said that the IMF view shows the Saudi government’s progress in implementing economic and structural reforms, as first-quarter budget data showed.
Jadaan also noted that the IMF statement reflects the key efforts made in developing the Saudi financial sector to ensure a robust Saudi financial sector, which realizes the strategic objectives of Saudi Vision 2030.
The fund said Saudi Arabia’s non-oil sector is expected to grow at a faster rate this year, at 2.9 percent in 2019. “Higher government spending has supported growth and the implementation of reforms,” the IMF said.
The statement commended the advancement in financial market reforms that culminated in getting KSA listed in the global stock and bonds markets indices and the expansion of the government bonds yield curve towards longer-term maturities which will contribute to developing the financial sector and deepening the debt market.
Real GDP growth rebounded to 2.2 percent after contracting in 2017. Real oil GDP increased by 2.8 percent (3.1 percent decline in 2017), while non-oil GDP growth rose to 2.1 percent (1.3 percent in 2017).
According to IMF: “The bankruptcy and commercial pledge laws fill important gaps in the legal infrastructure, while efforts to streamline procedures for starting a business and clearing containers through ports should support business formation and trade. Looking forward, FDI licensing requirements should be reviewed as planned and the privatization and PPP programs, which are now starting to see transactions, accelerated.
“The authorities should clearly signal that government employment will not increase in the future. Over time, the thought will need to be given to how the attractiveness of working in the government sector can be reduced and incentives for working in the private sector increased."
The statement added: “Mortgage lending is continuing to grow rapidly against the backdrop of the decline in real estate prices in recent years. While mortgages are still a relatively small share of total bank lending, and risks to banks are reduced by salary-assignment and government guarantees on a large share of new lending, SAMA should continue to keep a careful eye on the quality of real estate lending.”