The IMF gives positive assessment of Saudi Arabia's economic and fiscal position
The International Monetary Fund (IMF) has acknowledged that Saudi Arabia's economic and fiscal outlook is strong in the short term thanks to the Vision 2030 strategic plan, which has allowed the kingdom to diversify its economy and reduce dependence on oil exports since 2016.
In a recent report on the Saudi economy, the international body acknowledges that Saudi Arabia's economy has seen the fastest growth among G20 countries, with a rate of 8.7%.
Non-oil GDP growth was 4.8%, driven by robust private consumption and non-oil private investment, including large projects. The IMF highlights wholesale trade, retail, construction and transport as the main sectors driving Saudi non-oil GDP growth.
The good momentum also extends to employment: the unemployment rate was at a record low of 4.8% at the end of 2022, down from 9% in the Covid era.
Youth unemployment has halved (16.8% in 2022), while female labour force participation reached 36% in 2022, exceeding the 30% target set by the Saudi government in Vision 2030.
Inflation, despite booming economic activity, remains low. According to the IMF report, the average CPI grew by 2.5% year-on-year in 2022, thanks to domestic subsidies, price caps and a strong US dollar.
While Saudi CPI rebounded in early 2023 to 3.4% y-o-y, headline inflation returned to 2.8% in May 2023, as lower contributions from transport and food prices offset substantial increases in rents.
The Saudi banking system is also in good health, in the IMF's view, with a low non-performing loan ratio and growth in demand for consumer loans and project finance, which has served to offset the slowdown in the mortgage market.
Oil
The rise in the price of oil and the increase in oil production have allowed the Saudi current account to improve, reaching its highest surplus in a decade in 2022: 13.6% of GDP.
The IMF has particularly valued the economic transformation undertaken by the country, within the framework of the Vision 2030 agency, which has managed to reduce economic dependence on oil exports.
Since 2017, Saudi Arabia has managed to double non-oil revenues and increase reserves that serve to mitigate oil price volatility.
The international body has also praised the kingdom's Green Initiative, the implementation of which will be essential to achieve the goal of net emissions reductions with minimal losses.
Vision 2030
The Vision 2030 strategic plan, presented in 2016, aims to reduce Saudi Arabia's dependence on oil, as well as diversify its economy and develop sectors such as health, education, infrastructure, recreation and tourism.
Key strategic objectives include strengthening economic and investment activities, increasing non-oil trade between countries and promoting a more moderate image of the Kingdom.
The three pillars on which the plan is based are: making the country the 'heart of the Arab and Islamic worlds'; the determination to position Saudi Arabia as a global investment powerhouse; and transforming the country's location into a hub connecting three continents (Asia, Europe and Africa).