The Saudi economy is expected to grow 7.6 percent this year, up from 3.2 percent in 2021, on the back of rising oil revenues, the International Monetary Fund said on Wednesday.
The government’s Vision 2030 reform program, aimed at reducing the kingdom’s dependence on oil, has also given the economy a boost as more Saudis enter the workforce, particularly women, the IMF said.
“Liquidity and fiscal support, reform momentum under Vision 2030, and high oil prices and production helped the economy recover with robust growth, contained inflation and a resilient financial sector,” it said.
“Overall growth has been robust at 3.2 percent in 2021, driven in particular by a recovering non-oil sector – helped by higher employment for Saudi nationals, especially women.”
Gross domestic product is expected to “rise significantly to 7.6 percent in 2022, despite the tightening of monetary policy and budget consolidation, as well as the hitherto limited consequences of the war in Ukraine,” the IMF said, forecasting GDP growth of 3.7 percent for the year 2023
The kingdom managed to contain inflation to 3.1 percent in 2021, and the IMF forecast it would remain little changed at 2.8 percent this year, even as interest rates spike in much of the developed world fast.
The fund said this was largely due to “low pass-through” of double-digit wholesale price inflation and rising shipping costs hitting the global economy.
Record oil receipts and higher tax receipts from the non-oil economy meant the budget balance improved by almost nine percentage points last year to a deficit of 2.3 percent of GDP, the IMF said.
“Higher oil prices and oil production improved the current account by 8.5 percentage points in 2021, posting a surplus of 5.3 percent of GDP as strong oil-driven exports outpaced growing imports and large remittance outflows.”
Russia’s war in Ukraine and a surge in demand in the wake of the pandemic have sent crude oil prices skyrocketing. They are down $30 a barrel from a June peak but remain close to $100.
High oil prices have been a major factor in the inflationary woes affecting consumers around the world, but have resulted in unexpected gains for oil majors and producing countries.
Oil giant Saudi Aramco on Sunday announced record profits of $48.4 billion for the second quarter of 2022, the largest adjusted quarterly profit of any publicly traded company worldwide, according to Bloomberg news agency.
Net income rose 90 percent year-on-year for the world’s largest oil producer, which set its second straight quarterly record after announcing $39.5 billion for the first three-month period of the year.
Saudi Arabia has sought to open up and diversify its oil-dependent economy, particularly since Mohammed bin Salman’s appointment as crown prince and de facto ruler in 2017.
Abu Dhabi-based energy expert Ibrahim Elghitany said the oil bonanza is a “golden opportunity” for the kingdom as it generates the large surpluses needed to fund its non-oil development plans.
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