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IMF: Overall Saudi GDP Projected to Grow 7.6%

IMF confirms that Saudi Arabia mitigated the economic risks resulting from the Russian-Ukrainian war (Asharq Al-Awsat)
IMF confirms that Saudi Arabia mitigated the economic risks resulting from the Russian-Ukrainian war (Asharq Al-Awsat)
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IMF: Overall Saudi GDP Projected to Grow 7.6%

IMF confirms that Saudi Arabia mitigated the economic risks resulting from the Russian-Ukrainian war (Asharq Al-Awsat)
IMF confirms that Saudi Arabia mitigated the economic risks resulting from the Russian-Ukrainian war (Asharq Al-Awsat)

The International Monetary Fund (IMF) has highlighted solid indicators for the Saudi economy, expecting a 7.6 percent overall GDP growth in 2022.

Non-oil growth will increase to 4.2 percent in 2022, with the current account surplus will increase to 17.4 percent of GDP in 2022, said the Fund experts.

An IMF mission conducted discussions for the 2022 Article IV Consultation from May 23-June 6 and issued a concluding statement describing their preliminary findings.

The experts emphasized the strength of the Saudi economy and its financial position, explaining that the country's economic prospects have a positive outlook in the short and medium term.

"The near and medium-term outlook for Saudi Arabia is positive as growth is picking up, inflation will remain contained, and the external position will strengthen further."

The Fund indicated that the Kingdom managed the COVID-19 pandemic well and is well-positioned to weather the risks posed by the war in Ukraine and the monetary policy tightening cycle in advanced economies.

"Economic activity is picking up strongly, supported by a higher oil price and the reforms unleashed under Vision 2030," read the statement.

Saudi authorities' commitment to fiscal discipline should help further strengthen fiscal and external sustainability and avoid procyclicality while implementing the ambitious structural reform agenda will help ensure a durable, inclusive, and green recovery.

"Saudi Arabia is recovering strongly following a deep pandemic-induced recession."

The report also explained that the overall growth was robust at 3.2 percent in 2021, driven by recovering non-oil manufacturing, retail, e-commerce, and the trade sector.

The Fund pointed out that with increased labor force participation of nationals offsetting expatriates' departures, the unemployment rate has fallen further to 11 percent, a 1.6 percent drop from 2020, mainly owing to higher employment for Saudi nationals, particularly women, in the private sector.

The statement said that financial stability risks are well contained, and the banking system is profitable, liquid, and well-capitalized.

The staff's preliminary analysis found that the impact on credit growth and non-oil GDP is negligible and positive for the banking sector profitability when oil prices and liquidity are high.

They touched on the Kingdom's efforts concerning climate policies, stressing that the government is working to intensify investments in blue and green hydrogen production and is undertaking research and development focusing on the circular carbon economy.

They confirmed the strength of the Kingdom's economy and the power of its financial position, reflected in the great effort made by the government to promote its economic reforms in light of Vision 2030.

Saudi Arabia works on various projects in different sectors, including infrastructure, logistics, entertainment, tourism, and mining.

"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."

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Public Finance of GCC Countries Witnesses Significant Financial Surplus

The Statistical Center for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat) logo
The Statistical Center for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat) logo
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Public Finance of GCC Countries Witnesses Significant Financial Surplus

The Statistical Center for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat) logo
The Statistical Center for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat) logo

Data issued by the Statistical Center for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat) indicate that the financial risks of the GCC countries will be low in the short term amid forecasts of stable or declining interest rates locally and globally.

The reports issued by Credit rating agencies also signaled an improvement in the sovereign bond rating of the GCC countries in 2023. It is also expected that the credit attractiveness of GCC countries will increase, which would allow for the rescheduling of their public debts at lower financial costs.

According to the estimates of the GCC-Stat, the public debt of the GCC countries is expected to stabilize at 28% of the GCC countries’ GDP during the years 2024 and 2025. The financial budget reform plans, which are based on improving the efficiency of public spending and programs to stimulate growth in non-oil sectors, would contribute to achieving a balance between maintaining the economic growth rate and the sustainability of public spending.

The data issued by the GCC-Stat also reveal that the public debt of the GCC countries has doubled over the past ten years to reach about $628 billion in 2023, after it was $144 billion in 2014. The volume of debt as a percentage of the GCC Countries’ GDP increased to reach its peak in 2020 at 40.3%, before declining in the following years to reach about 29.8% in 2023.

The total public finances in the GCC countries also recorded a significant deficit during 2014-2021. The highest deficit value was registered in 2015, with an amount of about $158 billion, which accounts for 11.1% of the total GCC Countries’ GDP. In 2020, a deficit of $128 billion was recorded, which represents 8.8% of the total GDP.

The public finances of the GCC countries witnessed a significant financial surplus in 2022 estimated at $134 billion, representing 6.1% of the gross domestic product, followed by a surplus of $2 billion in 2023.

The total public revenues in the GCC developed significantly during the period 2021-2023 to record about $641 billion in 2023. Oil revenues accounted for 62% of public revenues, compared to $723 billion in 2022, of which oil revenues accounted for 67%.

Total public spending in the GCC countries reached its highest levels in 2023, recording about $639 billion. Current spending accounted for 85% of the total public spending, compared to 15% for investment spending in the GCC countries.