The International Monetary Fund expected that the Saudi economy will grow at a rate of 2.1% and 4.8% in the next year, compared to a contraction of 4.1% last year; Affected by the pressures of the Corona pandemic and the drop in oil prices.
Thus, the Fund has lowered its forecast for the performance of the Kingdom's economy from the 2.9% it expected in last April and 2.6% in January, while raising its forecast for growth next year to 4.8% instead of 4% in the April forecast.
At the conclusion of the Article IV mission for 2021, fund experts said that the Saudi authorities responded quickly and firmly to the Covid-19 crisis, and the ongoing economic recovery is expected to continue, provided that government policies contribute to achieving the necessary financial control in the medium term.
In a statement, IMF experts said that the private sector support programs implemented by the Saudi Central Bank (SAMA) and other banks have provided an outlet for small and medium enterprises.
However, they stressed the need to be careful in withdrawing it, while the important reforms in the labor market have led to a significant increase in the percentage of women’s participation in the workforce, which is supposed to contribute to facilitating career mobility for expatriates working in the private sector.
The fund welcomed the steps taken by the Kingdom to support the private investment environment, and believed that the public sector will have to be careful in its quest for growth and diversification of economic activities to avoid crowding out the private sector.
However, the Fund stressed the need to announce a clear time plan for public sector intervention in the new sectors, and said that in the event of public sector intervention, a time frame should be announced to end this intervention.
He indicated that this framework may be within five years, as announced by the Board of Directors of the Public Investment Fund, and to eventually devise an exit plan to allow more room for private sector participation.
The fund experts called on the Saudi authorities to be cautious in managing the exit from the remaining support measures related to the Corona pandemic and to continue the reforms planned for the longer term within the framework of the "Kingdom's Vision 2030". This is to protect recovery and give a stronger stimulus to growth.
The fund said that the Kingdom's budget for 2021 aims to reduce the levels of the fiscal deficit significantly, after the deficit increased during the last year 2020 to 11.3% of GDP, compared to 4.5% of GDP in 2019.
The fund experts expected the fiscal deficit to decline to 4.2% of GDP during the current year, a level slightly lower than budget forecasts, to be largely balanced in the medium term (by 2026), in light of the global oil market prospects and the approved government financial policies.
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