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."



Oil Prices Set for Second Annual Loss in a Row, Stable Day on Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
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Oil Prices Set for Second Annual Loss in a Row, Stable Day on Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo

Oil prices were on track to end 2024 with a second consecutive year of losses on Tuesday, but were steady on the day as data showing an expansion in Chinese manufacturing was balanced by Nigeria targeting higher output next year.

Brent crude futures fell by 7 cents, or 0.09%, to $73.92 a barrel as of 1306 GMT. US West Texas Intermediate crude lost 4 cents, or 0.06%, to $70.95 a barrel.

At those levels, Brent was down around 4% from its final 2023 close price of $77.04, while WTI was down around 1% from where it settled on Dec. 29 last year at $71.65.

In September, Brent futures closed below $70 a barrel for the first time since December 2021, while their highest closing price of 2024 at $91.17 was also the lowest since 2021, as the impacts of a post-pandemic rebound in demand and price shocks from Russia's 2022 invasion of Ukraine began to fade.

According to Reuters, oil prices are likely to be constrained near $70 a barrel in 2025 as weak demand from China and rising global supplies are expected to cast a shadow on OPEC+-led efforts to shore up the market, a Reuters monthly poll showed on Tuesday.

A weaker demand outlook in China in particular forced both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to cut their oil demand growth expectations for 2024 and 2025.

With non-OPEC supply also set to rise, the IEA sees the oil market going into 2025 in a state of surplus, even after OPEC and its allies delayed their plan to start raising output until April 2025 against a backdrop of falling prices.

Investors will also be watching the Federal Reserve's rate cut outlook for 2025 after central bank policymakers earlier this month projected a slower path due to stubbornly high inflation.

Lower interest rates generally incentivise borrowing and fuel growth, which in turn is expected to boost oil demand.

Markets are also gearing up for US President-elect Donald Trump's policies around looser regulation, tax cuts, tariff hikes and tighter immigration, as well as potential geopolitical shifts from Trump's calls for an immediate ceasefire in the Russia-Ukraine war, as well as the possible re-imposition of the so-called "maximum pressure" policy towards Iran.

Prices were supported on Tuesday by data showing China's manufacturing activity expanded for a third straight month in December but at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world's second-largest economy.

However, that was balanced out by potential for higher supply next year, as Nigeria said it is targeting national production of 3 million barrels per day (bpd) next year, up from its current level of around 1.8 million bpd.