The International Monetary Fund (IMF) projected in its annual report that Saudi Arabia’s economy would register a growth rate of 7.6 percent during this year. This is the highest growth rate of the real GDP among all economies of the world, which includes advanced economies, emerging market economies and developing economies, according to the report, titled “World Economic Outlook Update for the year 2022.”
Despite the main challenges facing the global economy, in light of the decline in activity in Russia and China and the decline in spending levels in the United States of America, the IMF’s estimates for the Kingdom contradict the overall worldwide gloomy and more uncertain outlook that stems from several factors. Notable among them are the Russian-Ukrainian crisis, the tightening of monetary policies in Europe, and the general lockdown measures as a result of the new outbreaks of COVID-19.
“A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize. Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while US consumer spending undershot expectations,” the report said while noting that several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide––especially in the United States and major European economies––triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.
As a result, the IMF lowered its forecast for the performance of the global economy in 2022 and 2023, as its estimates were affected by the slowdown in growth in the three largest economies of the world -the United States, China and the European Union region. However, IMF kept its forecast for the growth of the Saudi economy during 2022 at 7.6 percent, compared to its previous projections last April, and the Fund raised slightly its expectations for the growth of the Saudi economy during the year 2023 as well.
This announcement came less than a month after a delegation of IMF experts concluded a visit to Saudi Arabia for Article IV consultations for the year 2022. Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies.
The IMF mission, led by Amine Mati, conducted discussions for the 2022 Article IV Consultation from May 23‒June 6. In its preliminary statement issued last month, IMF praised the strength of the Kingdom’s economy as well as its financial position, and emphasized that the Kingdom's economic prospects are positive in the short and medium term with the continued recovery of economic growth rates, containment of inflation, in addition to the increasing strength of its external economic position.
In its report, the mission stated that Saudi Arabia managed the COVID-19 pandemic well and is well-positioned to weather the risks posed by the war in Ukraine and monetary policy tightening cycle in advanced economies. “Economic activity is picking up strongly, supported by a higher oil price and the reforms unleashed under Vision 2030.The authorities’ commitment to fiscal discipline should help further strengthen fiscal and external sustainability and avoid procyclicality while implementation of the ambitious structural reform agenda will help ensure a durable, inclusive and green recovery,” the report said while adding that Saudi Arabia is recovering strongly following a deep pandemic-induced recession and that inflation remains contained, despite some signs of inflationary pressures.
The IMF projected a rise in the Kingdom’s non-oil growth to 4.2 percent, as well as a jump in the current account surplus to 17.4 percent of GDP, as well as containing overall inflation at 2.8 percent on average. It noted that the Kingdom’s economic activity is witnessing a strong improvement supported by high oil prices and reforms that are being pursued vigorously by the government in the framework of Vision 2030, with limited impact of tightening global conditions thanks to the strong levels of capitalization enjoyed by the banking sector.
The IMF experts stressed that the Kingdom’s continued implementation of structural reforms will help ensure a strong, comprehensive and eco-friendly recovery, noting that the Kingdom is recovering strongly in the wake of the recession caused by the pandemic. They noted that the liquidity support, the support provided by the public finances, the momentum of reforms, the rise in oil prices, and the increase in its production helped the Kingdom’s recovery from the fallout of the pandemic.