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Saudi Non-Oil GDP Growth Forecast to Grow 3.9% in 2021

A night view of Riyadh, Saudi Arabia. (Reuters file photo)
A night view of Riyadh, Saudi Arabia. (Reuters file photo)
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Saudi Non-Oil GDP Growth Forecast to Grow 3.9% in 2021

A night view of Riyadh, Saudi Arabia. (Reuters file photo)
A night view of Riyadh, Saudi Arabia. (Reuters file photo)

The International Monetary Fund (IMF) projected Saudi Arabia’s real GDP growth at 2.1 percent this year, noting that the real non-oil GDP growth recovery is expected to reach 3.9 percent in 2021.

Real oil GDP growth is projected to reach -0.5% in 2021, according to the OPEC+ agreement output levels.

Further, the IMF forecast the Saudi deficit to decline to 4.2 percent of the GDP this year.

The statement underscored the positive results of the Saudi economic reforms, projected continuation in the economic recovery, an expected decline in the unemployment rate and inflation.

It also highlighted the success of the Saudi government's swift and decisive containment measures to limit COVID-19 cases and fatalities.

The statement further commented on the effective role of fiscal policies, and financial sector, and employment initiatives launched by the government and the Saudi Central Bank (SAMA) that helped cushion the impact of the pandemic on individuals and the private sector.

This coincides with the great progress in implementing the vaccination campaign during recent months.

The IMF also lauded the Kingdom's strong economic fundamentals supported by Vision 2030, which helped establish robust governance and cooperation between ministries and entities.

In light of this, it highlighted the progress made by the "Etimad" platform in strengthening government financial management.

In addition, it commended the impressive pace of equity and debt market reforms taken by the Saudi Capital Market Authority (CMA) and the National Debt Management Center, which contributed to increasing capital raising options for companies and investment opportunities.

Regarding Saudi women's employment in the labor market, the statement praised the wide steps taken by the government, as estimations show that the rate of Saudi women in the total workforce has increased by 13 points to exceed 33 percent during the past two years.

In addition, it welcomed the Saudi Arabia Green Initiative and its potential in boosting growth and employment, as well as reducing greenhouse gas emissions.

The Ministry of Finance welcomed the IMF statement.

Minister of Finance Mohammed Al-Jadaan said that the statement reaffirms the success of the Kingdom's government in achieving positive results and tangible successes during the most challenging year for the whole world.

"Such results have been achieved despite the impact of the COVID-19 pandemic, fluctuations in oil prices, sharp economic fluctuations, decline in global demand, receding growth and other challenges that the Saudi government has risen to.

“The continued implementation of Vision 2030 programs, plans and goals has enabled the Kingdom to introduce many economic and structural reforms that demonstrate the efforts in developing the financial sector and achieving fiscal sustainability that enhances the Saudi economy's strength despite all the challenges,” Jadaan added.

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Business

Saudi GDP Grows 2.8% in First Quarter

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)
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Saudi GDP Grows 2.8% in First Quarter

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)

Saudi Arabia's real gross domestic product grew 2.8% in the first quarter, year-on-year, preliminary government estimates showed on Thursday.

Non-oil activities grew 2.8% in the quarter, and oil activities increased 2.3% from the prior-year period, the General Authority of Statistics data ⁠showed.

On a quarterly basis, growth shrank 1.5% in the three months to March 31 compared to the fourth quarter, driven by a decline in oil activities.

Oil activity decreased 7.2% from the fourth quarter, while non-oil activity was almost flat.

Business

IMF Warns Asia to Keep Policy in Balance Amid Energy Disruptions

FILE PHOTO: A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., US, November 24, 2024. REUTERS/Benoit Tessier/File Photo
FILE PHOTO: A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., US, November 24, 2024. REUTERS/Benoit Tessier/File Photo
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IMF Warns Asia to Keep Policy in Balance Amid Energy Disruptions

FILE PHOTO: A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., US, November 24, 2024. REUTERS/Benoit Tessier/File Photo
FILE PHOTO: A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., US, November 24, 2024. REUTERS/Benoit Tessier/File Photo

Asian countries will need to keep their powder dry in preparation for future shocks even as they tackle an energy crisis caused by the Iran War, IMF Director for Asia Pacific Krishna Srinivasan said on Thursday.

With energy supplies running short due to the logjam in the Strait of Hormuz, southeast Asian economies have budgeted significant sums to cushion the impact of surging prices, and have also introduced measures to conserve energy, including work from home plans.

But Srinivasan, speaking at a media roundtable, warned countries against ramping up energy subsidies.

"If you give generalised subsidies, it's very hard to pull it back," he said, adding that countries should instead provide budget neutral ⁠and targeted fiscal ⁠support, and maintain fiscal discipline.

"In other words, cut elsewhere to support people who are being hit by the energy shock," Reuters quoted him as saying.

Srinivasan said that while some markets, such as Thailand and China, can hold off on tightening monetary policy because they are in deflationary territory, markets already above their inflation targets, including Australia, need to start now.

He also ⁠noted that some markets, such as the Philippines, have decided to tighten preemptively to anchor inflation expectations, but he added that the IMF's advice would have been to see through the shock and wait to see if inflation really picks up in a meaningful way.

"You may want to take insurance upfront or you may want to wait and see so that you don't hurt growth ... it's a very difficult balance to strike as a central bank governor," he said.

The IMF cut its global GDP outlook for 2026 to 3.1% on April 14, assuming ⁠a short-lived Middle ⁠East conflict and oil prices normalising in the second half of the year.

However, IMF chief economist Pierre-Olivier Gourinchas warned that the fund's "adverse scenario" of 2.5% growth looked increasingly likely, with continued energy disruptions and no clear path to end the conflict.

Srinivasan said that if the Strait of Hormuz remains closed beyond the next three months and oil prices stay elevated for the rest of the year, the IMF's more severe growth scenarios will become more likely.

There are still downside risks to growth, with a number of uncertainties facing the world economy, including the duration of the energy crisis and the severity of fertiliser shortages, which could create a food supply shock, he said.

Business

Euro Zone Inflation Soars Further Above ECB Target

FILE -Clouds cover the sky over the headquarters of the European Central Bank in Frankfurt, Germany, Sept. 11, 2025. (AP Photo/Michael Probst, File)
FILE -Clouds cover the sky over the headquarters of the European Central Bank in Frankfurt, Germany, Sept. 11, 2025. (AP Photo/Michael Probst, File)
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Euro Zone Inflation Soars Further Above ECB Target

FILE -Clouds cover the sky over the headquarters of the European Central Bank in Frankfurt, Germany, Sept. 11, 2025. (AP Photo/Michael Probst, File)
FILE -Clouds cover the sky over the headquarters of the European Central Bank in Frankfurt, Germany, Sept. 11, 2025. (AP Photo/Michael Probst, File)

Euro zone inflation surged further in April on soaring energy costs, Eurostat data showed on Thursday, adding to the case for interest rate hikes, even if benign underlying price growth figures ease the urgency of any move.

Inflation in the 21 countries sharing the euro currency jumped to 3.0% this month from 2.6% in March, moving further above the European Central Bank's 2% target, with energy costs accounting for the vast majority of the increase.

A closely watched figure ⁠on underlying or 'core' ⁠inflation, which excludes volatile food and energy prices, meanwhile slowed to 2.2% from 2.3% a month earlier.

Services inflation, a stubbornly high component of the price basket over the past several years, slowed to 3.0% from 3.2% while inflation for non-energy industrial ⁠goods, a key drag on prices picked up to 0.8%.

The figures are a mixed bag for the ECB, which is meeting on Thursday and will likely keep interest rates unchanged, even if it signals that policy tightening is increasingly likely, Reuters reported.

The high headline inflation print strengthens the argument for interest rate hikes but the underlying figures suggest that the initial energy shock is not yet creating major ⁠second round effects.

The ⁠ECB is largely powerless against an energy shock but must step in if these second round effects become visible as they risk creating a hard-to-break self-sustaining inflation spiral.

This is why investors expect the ECB to hike its 2% deposit rate already in June and see at least two more moves before the end of the year.

This outlook is volatile, however, and largely depends on developments in the Iran war and oil prices, which hit a four-year-high of $124 on Thursday.