In their introductory statement issued after the conclusion of the article 4 consultations visit with the Saudi government for 2022, the experts of the International Monetary Fund (IMF) announced that the economic prospects for the Kingdom are positive in the short and medium term, with the continued recovery of economic growth rates, containment of inflation, in addition to an increase in the strength of its external economic position.
A mission from the IMF, led by Amin Matti, held discussions within the framework of the 2022 Article IV consultations with the Kingdom of Saudi Arabia from May 23 to June 6.
According to the statement, the fund expected the Kingdom’s gross domestic product to grow by 7.6 percent this year, non-oil growth to rise to 4.2 percent, and an increase in the current account surplus to 17.4 percent of GDP, as well as to contain overall inflation at 2.8 percent on average.
The Kingdom has succeeded in dealing with the Corona pandemic
The statement indicated that the Kingdom has succeeded in dealing with the coronavirus pandemic, stressing that it is in a favorable position to overcome the risks posed by the war in Ukraine and the monetary policy tightening cycle in advanced economies.
It also indicated that the economic activity in it is witnessing a strong improvement, supported by the rise in oil prices and the reforms undertaken by the government within the framework of Vision 2030, and a limited impact of the tightening of global conditions, thanks to the strong levels of capitalization enjoyed by the banking sector.
In its final statement, the mission stressed that Saudi Arabia’s continued implementation of structural reforms will help ensure a strong, comprehensive and environmentally friendly recovery, pointing out that the Kingdom is recovering strongly in the wake of the recession caused by the pandemic.
The Kingdom helped the recovery process, and overall growth witnessed a strong boost, reaching 3.2 percent in 2021, primarily driven by the recovery of the non-oil manufacturing sector, the retail sector (including e-commerce), and the commercial sector.
The mission welcomed the Kingdom’s commitment to maintaining the sustainability of public finances and the efforts made to avoid keeping pace with the trends of the economic cycle by setting a spending ceiling that is not affected by fluctuations in oil prices.
The fund’s experts also expected that the public finances’ performance in one year would outperform the budget expectations, and that the debt-to-GDP ratio would decline.
They also emphasized that financial stability risks are well contained. The levels of profitability, liquidity and capitalization are good at the level of the banking system.
The fund expected that the impact of the further tightening of the global monetary policy will be limited on credit growth and non-oil GDP, and positive on the profitability of the banking sector.
The statement considered that it is necessary to continue implementing the ambitious structural reforms agenda within the framework of the Kingdom’s Vision 2030 in order to diversify the Saudi economy and support growth. Supporting more investments in the private sector also requires careful calibration of the various target elements in the Kingdom’s Vision 2030.
The final statement of IMF experts touched on the Kingdom’s efforts with regard to climate policies, stressing that the government is working to intensify investments in the production of blue and green hydrogen, in addition to its continuous efforts in research and development with a focus on the circular economy.