IMF: Private Sector Investments Will Drive Saudi Economic Growth

Saudi Arabia is seeking to strengthen its economic capabilities by reducing dependence on oil. (AFP)
Saudi Arabia is seeking to strengthen its economic capabilities by reducing dependence on oil. (AFP)
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IMF: Private Sector Investments Will Drive Saudi Economic Growth

Saudi Arabia is seeking to strengthen its economic capabilities by reducing dependence on oil. (AFP)
Saudi Arabia is seeking to strengthen its economic capabilities by reducing dependence on oil. (AFP)

Saudi Arabia’s budget will achieve more financial revenues following a production cut announced by the Kingdom with OPEC and its allies, according to the International Monetary Fund (IMF), thanks to higher crude prices.

“The impact on the budget and on the external position relative to what we had projected is positive,” Amine Mati, the IMF mission chief to Saudi Arabia, said in an interview in Washington, as reported by Bloomberg.

“So the price impact would offset the loss that could arise from the production,” he added.

IMF experts had pointed to expectations that oil prices would decline by about 17.3 percent in 2023, with an assumed average price per barrel, based on futures markets, at $73.13 in 2023 and $68.90 in 2024, compared to $96.36 in 2022.

The decision of Saudi Arabia and other oil countries to reduce production has moved the global markets, especially as it followed the global banking crisis in the United States and Europe, which contributed to the decline in futures prices in mid-March.

However, the producers’ announcement to cut 1.1 million barrels per day, in addition to Russia’s decision to trim oil production by 500,000 barrels per day until the end of 2023, strengthened price stability.

The IMF estimates predicted performance for the current and next year at a slower-than-expected rate of 3.1 percent in 2023 and 2024, which is much lower than its previous expectations of the growth of the Kingdom’s economy at about 9 percent.

While Saudi Arabia’s economic growth rate may suffer from lower crude production, the cuts won’t affect its non-oil expansion “because that’s going to be driven by domestic demand,” Mati said, according to Bloomberg.

“At least in the short term, we don’t see a disruption in the spending pattern at the central government budget. And on the economy as a whole, we see some of the investment in the private sector driving the growth,” he added.

Saudi Arabia’s General Authority for Statistics (GASTAT) recently revealed that the Kingdom’s economy grew by 8.7 percent over the past year.



Oil Little Changed after US Crude Inventory Build

An oil pump of IPC Petroleum France is seen during sunset outside Soudron, near Reims, France, February 6, 2023. REUTERS/Pascal Rossignol/File Photo
An oil pump of IPC Petroleum France is seen during sunset outside Soudron, near Reims, France, February 6, 2023. REUTERS/Pascal Rossignol/File Photo
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Oil Little Changed after US Crude Inventory Build

An oil pump of IPC Petroleum France is seen during sunset outside Soudron, near Reims, France, February 6, 2023. REUTERS/Pascal Rossignol/File Photo
An oil pump of IPC Petroleum France is seen during sunset outside Soudron, near Reims, France, February 6, 2023. REUTERS/Pascal Rossignol/File Photo

Oil prices were little changed on Thursday after rising to a near one-week high in the previous session, as an industry report showing a buildup in US crude stockpiles pressured the market.

Brent futures were up 34 cents, or 0.5%, at $76.38 a barrel by 1407 GMT. US West Texas Intermediate crude rose 26 cents, or 0.4%, to $72.51.

US crude stocks rose by 3.34 million barrels last week, market sources said, citing American Petroleum Institute figures on Wednesday.

Oil prices edged lower on Thursday because of the stock build in the US, said Saxo Bank analyst Ole Hansen.

"The market continues to lack a clear direction, with supply disruptions in Kazakhstan and the OPEC+ production increase delay being offset by global demand worries," Hansen said.

Official oil inventory data from the US Energy Information Administration (EIA) is due on Thursday.

Separately, Russia said Caspian Pipeline Consortium oil flows, a major route for crude exports from Kazakhstan, were reduced by 30%-40% on Tuesday after a Ukraine drone attack on a pumping station.

A 30% cut would equate to the loss of 380,000 barrels per day of market supply, Reuters calculations show.

However, other factors and potential boosts to oil supply added to concerns about prices.

Potential restarts of oil flows from Iraq's Kurdistan region were offsetting supply risks, analysts at ING said in a note.

Türkiye, which hosts the port of Ceyhan that loads the Iraqi oil from the Kurdistan region, did not receive confirmation from Iraq on the resumption as of Thursday, the country's energy minister told Reuters.

A resumption of the Iraqi oil flows would add 300,000 barrels of supply per day onto the market, ING analysts said.

Import tariffs announced by US President Donald Trump's administration could dent oil prices by raising the cost of consumer goods, analysts said, weakening the global economy and reducing fuel demand. Concerns about European and Chinese demand were also helping keep prices in check.

"It is natural to be concerned about the global economic outlook as Donald Trump takes a sledgehammer smashing away at the existing global 'free-trade structure' with signals of 25% tariffs on car imports to the US," said Bjarne Schieldrop, chief commodities analyst at SEB.