The IMF staff praised the economic and financial condition of the Kingdom of Saudi Arabia in their final statement at the end of their visit for the Article IV consultation with the Kingdom in 2022. They reaffirmed their positive outlook for the Kingdom's economy in the short and medium term, anticipating further economic growth, inflation control, and a strengthened external economic position.
According to the statement, the IMF projected the Kingdom's GDP to increase by 7.6% in 2022, with the non-oil sector expected to grow by approximately 4.2%. The current account surplus is forecasted to reach 17.2% of GDP, while overall inflation is predicted to remain at an average of 2.8%.
The IMF noted that the Kingdom effectively managed the COVID-19 pandemic and is well-positioned to overcome the risks posed by the Ukrainian crisis and tightening monetary policies in developed economies. The impact of tightening global conditions on the Kingdom's economy is limited due to the banking sector's high levels of liquidity and capitalization. Economic activity is significantly improving, aided by increased oil prices and government reforms in line with Vision 2030.
The statement emphasized the optimistic short and medium-term prognosis for the Kingdom's economy, with ongoing recovery in economic growth, inflation containment, and a stronger external economic position. The implementation of structural reforms will contribute to a robust, comprehensive, and environmentally friendly recovery. The Kingdom's strong recovery from the pandemic-induced recession is attributed to the support provided by public finances, momentum in reforms, high oil prices, and increased oil production. The real non-oil GDP grew by 4.9% in 2021, primarily driven by the recovery of the manufacturing and retail sectors (including e-commerce) and the commercial sector.
The IMF staff also lauded the decline in the Kingdom's unemployment rate to 10.1% in the first quarter of 2022, thanks to the high rates of employment of Saudi citizens in the private sector, and praised the initiatives to increase women's participation in the workforce, surpassing Vision 2030 targets.
Regarding fiscal policy, the IMF mission commended the Kingdom's commitment to ensuring the sustainability of public finances and efforts to avoid cyclical spending by establishing a spending cap unaffected by oil price fluctuations. It is expected that public finances will outperform budget forecasts in 2022, leading to a decline in the debt-to-GDP ratio.
The IMF staff's final statement also welcomed the Kingdom's climate policies and its efforts to intensify investments in the production of blue and green hydrogen, along with continuous research and development focusing on the circular carbon economy.
Minister of Finance, H.E. Mohammed bin Abdullah Al-Jadaan, expressed his appreciation for the IMF staff's recognition of the positive indicators and future prospects for the Saudi economy. He highlighted the Kingdom's resilience and strength in overcoming global economic challenges while maintaining financial sustainability. He emphasized the importance of the economic and structural changes under Vision 2030 in achieving sustainable and inclusive economic growth. The Minister also welcomed the praise for the Kingdom's efforts in mitigating the economic, social, and health effects of the pandemic, highlighting the strong recovery and the opportunity provided by rising oil prices to accelerate the pace of reforms under Vision 2030.
It's worth noting that the IMF issued an initial statement following the conclusion of the Article IV consultation with the Kingdom of Saudi Arabia in April 2022, and this final statement confirms the preliminary findings of the previous statement.
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