DUBAI, May 3 (Reuters) – Government-led reforms and growth in private investment in new sectors will help support non-oil economic growth in Saudi Arabia amid an expected sharp slowdown in overall growth this year, it said a senior IMF official.
The Saudi economy grew 8.7% last year as high oil prices boosted revenues and led to the kingdom’s first budget surplus in almost 10 years.
The IMF expects Saudi GDP growth to more than halve to 3.1% this year, in line with the forecast for Middle East oil exporters. However, the forecast is above the growth rate of 2.6% that the IMF forecast in January.
Several OPEC+ member nations, led by Saudi Arabia, the world’s largest crude oil exporter, recently announced surprise oil production cuts from May, which initially pushed global prices higher, although global concerns and an uncertain demand outlook are weighing on prices.
“This year, with the implementation of the new OPEC+ quotas, we expect the oil sector to slow down,” Jihad Azour, director for the Middle East and Central Asia at the IMF, told Reuters, adding that the impact on the kingdom’s budget depended on prices.
“The fall in output will affect growth as output will fall, but revenue could increase and that could have a positive impact on the balance of payments, reserves and the budget deficit,” he said.
“The strategy of the last five to six years has clearly contributed to making the Saudi economy and public finances less dependent on the oil cycle.”
Saudi Arabia has embarked on an ambitious economic transformation plan known as Vision 2030, investing billions to diversify into sectors like tourism, launch massive infrastructure projects, and develop the financial and private sectors.
“The size of the non-oil economy is growing and it’s mostly driven by the private sector,” Azour said.
Reporting by Rachna Uppal; Adaptation by Leslie Adler
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