IMF supports Saudi's shift in investment priorities, maintains growth forecast
IMF highlighted the significant expansion of the Kingdom’s non-oil sectors while maintaining its economic growth forecast at 4.7% for 2025
The International Monetary Fund (IMF) has voiced its support for the Saudi government’s decision to refocus investment priorities, while maintaining its economic growth forecast for the Kingdom at 4.7% for next year.
The IMF highlighted the significant expansion of the Kingdom’s non-oil sectors, noting they are driving "remarkable progress in Saudi Arabia’s unprecedented economic transformation."
This praise came in its annual report following the Article IV consultations, released on Wednesday. The report also reiterated the IMF’s recommendation for gradually liberalizing fuel prices.
Under Article IV of the IMF’s founding agreement, bilateral consultations with member countries take place, followed by the preparation of a report by IMF experts, which is then reviewed and finalized by the Executive Board.
The report confirmed that the Executive Board "supported the recalibration of Saudi Arabia’s investment spending," noting that this move has helped mitigate the risks of economic overheating.
The report recommended greater transparency on how this shift aligns with Vision 2030 objectives, to help clarify government priorities and shape investor expectations.
Growth in non-oil sectors
Saudi Arabia’s reduced oil production caused a 0.8% contraction in overall economic growth in 2023, but the non-oil sectors experienced robust growth of 3.8%, with unemployment rates reaching historic lows. The gradual reversal of oil production cuts is expected to lift overall growth to 4.7% by 2025, according to the IMF.
The report also noted that inflation slowed to 1.6% year-over-year in May 2024, despite rental prices rising by nearly 10% due to an influx of expatriate workers and large-scale redevelopment efforts in cities like Riyadh and Jeddah.
The IMF praised the resilience of Saudi Arabia’s banking sector, emphasizing that local banks remain well-positioned to handle potential economic shocks.
The IMF again urged the Saudi government to gradually phase out the remaining fuel subsidies, recommending the implementation of social programs targeting vulnerable groups to ease the transition. Additionally, IMF stressed the importance of containing the public wage bill to maintain fiscal sustainability.
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