The non-oil recovery that started in the second half of 2020 is expected to continue with non-oil growth projected at 4.3 percent this year, the International Monetary Fund (IMF) said on Thursday.
Executive directors highlighted that Saudi Arabia entered the COVID-19 pandemic with strong policy buffers and a positive reform momentum.
“As the lockdown eased and the economy recovered in the second half of 2020, the government withdrew or increasingly targeted the temporary fiscal and employment support. SAMA’s borrower support has been retained,” said the IMF.
“While central government fiscal consolidation will be a drag on growth, it is expected to be offset by higher Public Investment Fund investment and strong private demand,” it continued.
“Real oil GDP growth is projected at -0.4 percent in 2021 as production is assumed to remain in line with the OPEC+ agreement and overall real GDP is expected to grow by 2.4 percent. Over the medium-term, growth is expected to accelerate as the economic reform agenda begins to pay dividends,” according to the IMF.
“Inflation is expected at 3.2 percent in 2021 (annual average). Credit to the private sector has been very strong, boosted by programs to encourage mortgage and SME lending. Banks remain liquid, well-capitalized, and well-regulated and supervised,” it added.
Further, the program to codify legal practices, the PPP/asset sales program, the deepening of the domestic capital markets, reforms for e-government and to harness the potential of digitalization, and the support to SMEs and entrepreneurs are all important to support a more diversified and inclusive recovery.
