IMF trims Saudi Arabia growth forecast to 2.1% in 2023
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IMF trims Saudi Arabia growth forecast to 2.1% in 2023

IMF trims Saudi Arabia growth forecast to 2.1% in 2023

The fund projected that Saudi Arabia would swing to a deficit in 2023 on lower oil revenue

IMF trims Saudi Arabia growth forecast

The International Monetary Fund (IMF) trimmed Saudi Arabia’s growth forecast to 2.1 per cent in 2023, lower than its May projection on the back of the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) production cuts that were announced in April.

The fund said in a statement that while April’s oil production cuts would reduce overall growth to 2.1 per cent, non-oil growth is expected to remain robust, averaging 5 per cent this year, driven by strong consumption spending and accelerated project implementation boost demand.

Saudi Arabia’s economy expanded by 8.7 per cent in 2022, the fastest-growing G20 economy, as higher oil prices boosted revenue and led to the kingdom’s first budget surplus in almost 10 years. The kingdom’s GDP crossed the $1tn mark for the first time in 2022 as higher oil prices boosted government revenues.

The Washington-based fund forecasted that Saudi Arabia would swing to a deficit in 2023 on lower oil revenue, without providing further details, but its May report forecasted a deficit of 1.1 per cent of GDP in 2023. However, potential additional dividends from Saudi Aramco are expected to improve the country’s fiscal position.

On the upside, higher oil prices – as expectations of strong oil demand for the rest of the year persist – possible change in OPEC+ oil production cuts and accelerated structural reforms and investment could spur growth.

The government in Riyadh is expected to contain headline inflation in 2023. However, at 2.8 per cent, the IMF said the average consumer price index will be slightly higher than in 2022.

Saudi Arabia’s net foreign assets fell to $410bn (SAR1.54tn) in April, the lowest since January 2010, but the IMF said the kingdom remains at comfortable levels – about 20-month import cover.

Saudi Arabia drives sustainable growth

Meanwhile, the so-called ‘Big Three’ credit ratings agencies – S&P Global, Moody’s and Fitch Rating – upgraded Saudi Arabia’s sovereign debt rating to “A/A-1”, “A1” and ‘A+’, respectively, citing the country’s robust fiscal and external balance sheets and significant reform momentum in recent years as the country advances its economic diversification strategy.

The current oil and gas price outlook is creating an ideal environment for Saudi Arabia to proceed with ambitious reforms under favourable macroeconomic and financing conditions while putting debt on a firm downward path.

Saudi Arabia has undergone a breakneck transformation over the years and the country’s sovereign fund Public Investment Fund (PIF) is central to the government’s economic reform initiative as it looks to wean the economy off its heavy reliance on oil revenues as part of Vision 2030.

PIF is tasked with stimulating inward investment, accessing new technologies, developing local industries and addressing widespread underemployment in the country. To date, the wealth fund has established 77 companies and has generated more than half a million direct and indirect jobs.

Earlier in June, PIF agreed to acquire a 30 per cent stake in Tamimi Markets Company, merged Liv Golf with the PGA Tour and DP World Tour and transformed four clubs – Al Ittihad, Al Ahli, Al Nassr, and Al Hilal – into private companies as part of Saudi Arabia’s sports clubs privatisation project under Vision 2030.

Read: Saudi Arabia’s 2022 GDP grows 8.7 per cent, boosted by higher oil prices

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