Saudi Arabia’s economic outlook is positive and the country’s economy will continue to grow, albeit at a modest rate of four per cent in 2014 and 2015, according to International Monetary Fund (IMF).
Tim Callen, the IMF’s Mission Chief to Saudi Arabia, conducted discussions with senior Saudi officials and businesses earlier this month. “The growth will be led by government spending and robust private sector activity. Risks around this growth outlook are evenly balanced. Inflation is likely to remain subdued,” says Callen.
“Saudi Arabia continues to play a systemic role in stabilizing the global oil market, which contributes positively to the global economy. Regionally, Saudi Arabia is a generous provider of financial assistance to other countries, while remittances sent home by expatriates working in the country are an important source of income for many countries.”
Applauding the Kingdom’s steps toward economic reforms, the IMF’s Saudi spokesperson says: “The government is undertaking an ambitious economic reform and investment programme to further develop and diversify the economy and create jobs, and important progress is being made. The programme is focused on further developing infrastructure, improving the business environment, increasing the quality of education and skills, and employing more Saudi nationals in the private sector.”
However, Saudi Arabia will continue to witness a decline in its fiscal surplus. “The IMF expects Saudi’s fiscal surplus to decline further in 2014, as government spending increases, and the budget may move into deficit in the next few years. It is, therefore, important to slow the growth of government spending.
“The substantial fiscal buffers that the government has accumulated over the past decade already provide important protection to the economy in the event of a negative shock, such as a fall in oil prices, and should be maintained,” says Callen.
The authorities have initiated actions to strengthen the fiscal framework and they are encouraged by agencies, such as the IMF, to build on this progress to further reform the annual budget, introduce a medium-term budget framework and develop tools to manage the volatility of oil revenues.