Saudi Arabia is moving ahead with economic reforms and growth in its non-oil economy will pick up this year despite any delay to a planned sale of shares in national oil giant Saudi Aramco, a senior International Monetary Fund official said on Friday.
“Aramco was one part of the reform program. Other parts are moving ahead pretty well,” Tim Callen, the IMF’s mission chief for Saudi Arabia, told reporters after annual consultations with Saudi government.
IMF’s projections for Saudi economic growth to accelerate in coming years were based on expectations for a broad range of reforms to continue.
An IMF report on the annual consultations predicted Saudi Arabia’s gross domestic product would grow 1.9 percent this year, while the non-oil GDP growth is projected to accelerate to 2.3 percent.
“Growth is expected to pick up further over the medium term as the reforms take hold and oil output increases,” the IMF said.
The report also predicted a strengthening of Riyadh’s state finances because of higher oil and non-oil revenues.
IMF Executive Directors commended the authorities for the progress made in implementing their reform agenda.
They welcomed the broadly positive outlook and emphasized that higher oil prices should not slow the reform momentum.
They agreed that continued commitment to implementing wide-ranging reforms will help achieve the fiscal objectives and promote non-oil growth. Directors welcomed the ongoing fiscal consolidation efforts and agreed that aiming for a balanced budget by 2023 is appropriate.
The Directors emphasized the importance of fully implementing the revenue reforms and limiting the future growth of government spending to achieve this objective. In the event oil prices exceed those assumed in the budget, most Directors recommended saving the additional revenues to begin to rebuild fiscal buffers.
IMF indicated the government is continuing to implement wide-ranging economic and social reforms under Vision 2030. These reforms are structured under Vision Realization Programs (VRPs).
The authorities are continuing with their fiscal reforms including through the introduction of the value-added tax and further energy price increases at the beginning of 2018.
Reforms are also ongoing to improve the business environment, develop a more vibrant small and medium enterprises (SME) sector, deepen the capital markets, increase the involvement of women in the economy, and develop new industries with high potential for growth and job creation.
Directors agreed that the exchange rate peg to the US dollar continues to serve Saudi Arabia well, given the structure of the Saudi economy.
