IMF: Saudi economy thriving, budget position sound after 2023 consultation
Riyadh, September 06, 2023, After finishing its 2023 Article IV Consultation negotiations with the Kingdom of Saudi Arabia, the International Monetary Fund (IMF) published a favorable assessment of the country. According to the IMF assessment, the Saudi economy is thriving and growing, and the Kingdom's budgetary position is sound. The Saudi Arabian government's efforts to carry out its Saudi Vision 2030 reform agenda have gained plaudits from the IMF. The IMF also praised the Kingdom's accelerated digital transformation, rising female labor market participation, regulatory and business climate reforms, sustained investments in human capital, and continuous non-oil GDP growth. The Kingdom was noted as having the fastest-growing G20 economy in 2022 with a rate of 8.7%, non-oil GDP growing at about 4.8%, and Saudi unemployment rates declining to their lowest historical level at 8%. The report praised the Kingdom's ongoing efforts to complete economic and financial reforms and achieve Saudi Vision 2030 targets, noting that the Kingdom had been the fastest-growing G20 economy in 2021 with a rate of 3.9%. The percentage of Saudi women who are employed has increased to historic highs of over 37% (from 18% in 2017), exceeding the 30% goal set by Saudi Vision 2030. The report praised the ongoing national initiatives to increase women's economic support in the country.
The consumer price index (CPI), which has been a threat to the world economy, was kept under control in 2022 by domestic subsidies and price caps on specific products, as well as the strength of the US dollar, according to the report, which also praised the Kingdom's efforts to do so. The average index rose to 3.4% in early 2023, according to the research, but fell to 2.8% by May 2023.
The continuation of Saudi Arabia's Vision 2030 reforms, according to the IMF report, demonstrates progress in the nation's efforts to diversify its economy and lessen its reliance on oil. The IMF predicted that the strong momentum of non-oil GDP growth would continue, with average growth reaching 4.9% in 2023. Strong consumption spending, increased private investment through projects and programs that boost the growth of the private sector, and accelerated project implementation will all contribute to the growth of non-oil GDP, the IMF said.
The Fiscal Sustainability Program's ongoing reform initiatives, such as increasing non-oil revenues, streamlining spending, and bolstering the public finance system, were also welcomed in the report. Along with highlighting the robust fiscal space and low and manageable debt levels, it also praised the extraordinary advancements in public financial transparency made possible by the extended budget statement and other in-depth reports.
The Saudi Central Bank (SAMA) has been working tirelessly to update the regulatory and supervisory frameworks, which has helped the banking sector perform well this year, according to the IMF, which also emphasized that the Kingdom's monetary policy (fixed exchange rate) is appropriate and beneficial to the Kingdom's economy. With high capital adequacy ratios, low non-performing (NPL) loan ratios, and high profitability rates (above pre-pandemic levels), this helped the company achieve its goals. The Saudi Central Bank's attempts to position the Kingdom as a center for fintech were also praised in the study.
The report commended the Kingdom's administration for its ongoing efforts to strengthen governance, combat corruption, and address the problems caused by climate change. It also praised the initiatives being taken to increase renewable energy, the Kingdom's ambition to become the world's largest producer of clean hydrogen, and the Saudi Green Initiative's (SGI) practical role in reducing carbon emissions, anticipating that these initiatives will help reduce emissions to the target level for the year 2030 and pointing out that the Kingdom recorded the second-lowest emissions per unit produced globally.
In order to reach the Vision 2030 target of 70% home ownership by 2030, the study underlined the positive development in the Saudi housing industry brought about by a variety of programs that helped to raise the rate of home ownership to 60.6% in 2022. The significance of industrial policy in the Kingdom's efforts to structurally restructure and diversify under Saudi Vision 2030 was also underlined.
According to the research, the Kingdom has undergone a significant digital transformation and is ranked highly in a number of global rankings for digitization, including digital infrastructure and the maturity of digital government transformation. Furthermore, Saudi Arabia's strong digital development has increased financial inclusion, the financial sector's resilience, and government effectiveness, highlighting the crucial role Saudi Vision 2030 played in quickening the speed of digital change.
His Excellency the Minister of Finance Mohammed Aljadaan commented on the outcomes of the International Monetary Fund's Article IV consultations with the government of the Kingdom. He welcomed the Fund's praise for the reforms seen in the Saudi economy and the Kingdom's ongoing efforts to implement economic and financial reforms. His Excellency also took note of the Fund's mention of the Kingdom's strong fiscal situation, advancements in the openness of its public finances, and financial policies and reforms that have backed up its fiscal policy and reduced risks.
Aljadaan pointed out that the research underlined the ongoing success in carrying out the Saudi Vision 2030 plan and economic reform, as well as existing indicators and promising future prospects for the Saudi economy. The IMF emphasized the Kingdom's economy's success in meeting challenges and maintaining financial sustainability, which helped to increase its durability and strength, he said. The IMF also noted the significant role played by the government's economic and structural reforms, which led to sustainable and inclusive economic growth.
The outcomes of the Article IV Consultations with the Kingdom's government for 2023 were previously reported in a concluding statement by the International Monetary Fund's Staff Mission, and this latest report from the IMF supports those findings.