IMF staff reaffirm continued recovery of Saudi economy (SPA)
RIYAD: The staff of the International Monetary Fund (IMF) reaffirmed the continued recovery of the Saudi economy and the slowdown in consumer price index (CPI) inflation, stating that they expect the Non-oil GDP growth will reach 4.3% this year and 3.6% in 2022.
According to the Saudi News Agency, the IMF expects the private sector to lead the growth this year to reach 5.8%, and that it will continue in the medium to long term with an average growth of 4.8%. %.
This statement was included in the conclusion of the 2021 Article IV consultation, which was released recently.
Staff praised the Saudi government’s swift and decisive response to the Covid-19 pandemic and the swift establishment of a Supreme Crisis Committee to manage and coordinate efforts between government agencies, as well as the ambitious reforms that were being implemented. earlier work under the Saudi Vision 2030 has been instrumental in helping the Saudi economy overcome the pandemic, the increasing digitization of government and financial services, reforms aimed at increasing labor market mobility and strong Political buffers meant the economy was well equipped to handle the COVID crisis. In addition, the private sector financing support program ”, launched by the Saudi Arabian Central Bank, has helped to help SMEs face the challenges of the pandemic.
Staff also reaffirmed that policies to support the non-oil economy have been successful, that the establishment of the High Level Crisis Response Committee “was essential to effectively and proactively manage the crisis, and that ‘Strict early containment and health mitigation measures have limited cases and deaths.
Regarding current economic performance, IMF staff estimate that the “Shareek” partnership program will provide incentives through the tax system, access to credit and regulatory reforms to encourage investment. In addition, they believe that labor market reforms (cancellation of the Kafala sponsorship system) will result in a more competitive and attractive labor market for more skilled expatriates.
Regarding the ongoing reforms to boost female employment, staff anticipate a continued increase in female participation rates (increased from 13 percentage points to over 33 percent in the past two years). Staff also forecast that credit to the private sector will increase sharply, boosted by housing and SME loans. Staff see the new social security law as an important step in strengthening the framework for income support for the less well off.
Staff said the potential for renewable energy in Saudi Arabia is huge and will attract domestic and foreign private investors. Staff welcomed the high-level announcement of Saudi Arabia’s climate strategy and the country’s leadership’s commitment to reducing GHG emissions.
Regarding public finances and transparency, IMF staff confirmed that significant progress has been made recently to increase accountability and transparency in public procurement, notably through the “Etimad Platform”. They welcomed the impressive pace of capital market reforms to increase the liquidity and depth of local equity and bond markets, including by providing better access to foreign investors and introducing financial derivatives. Staff pointed out that the liquidity of the banking system is at very comfortable levels.
The final statement of the 2021 Article IV consultation addressed financial inclusion and FinTech, indicating that the FinTech sector in Saudi Arabia is maturing rapidly with support from SAMA and CMA. The final statement stressed that the peg remains the best exchange rate option, as Saudi Arabia has high reserves which are more than enough to maintain the peg.
It should be noted that the staff mission has already issued a statement following the 2021 Article IV consultation for the Kingdom of Saudi Arabia, which took place in April 2021. This final declaration confirms the first results obtained by the previous declaration.