The International Monetary Fund (IMF) estimated that Saudi Arabia’s economic growth in 2019 may be slightly higher than its earlier 1.8 percent forecast as the non-oil sector is expanding faster than the wider economy, a senior official said.
The budget deficit this year could be 7.9 percent, higher than 2018 on an assumption that oil prices would be lower in 2019 compared to last year, Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told Reuters Monday.
“We expect non-oil growth to be at 2.6 percent this year and 2.9 percent for 2020,” he said in an interview in Dubai.
“Based on the early assessment of the (IMF) team, we think there are upside risks, i.e. growth could be slightly higher than the one we have in our projections,” Azour said.
Azour pointed out that the IMF supports Saudi Arabia’s goal to close its budget deficit by 2023.
He said the Kingdom needs to continue reducing the deficit gradually, adding that diversification of the Saudi economy requires supporting small and medium enterprises (SMEs).
“Government spending and multiyear infrastructure plans will likely provide some support to economic activity in Saudi Arabia,” according to IMF’s Regional Economic Outlook for 2019.
Saudi Central Bank Governor Ahmed al-Kholifey told Reuters last week that Saudi economic growth in 2019 would be “no less than two percent.”
The Saudi economy grew by 2.2 percent last year, recovering from a contraction in 2017.
Azour said an IMF team was now on the ground in Saudi Arabia and revised economic numbers were expected next week.
The IMF’s projection for the Saudi budget deficit in 2019 is based on the assumption that oil prices will remain in the mid-$60 per barrel range this year, he said.
“The decline in oil price and the volatility we saw in the market are leading to an expected deficit of 7.9 percent,” Azour explained, expecting the situation to improve in 2020 to 5.7 percent.
Saudi Finance Minister Mohammed al-Jadaan said last week the Kingdom recorded a budget surplus of SAR27.8 billion ($7.4 billion) in the January-March period, its first since oil prices plunged in 2014.
