| The latest International Monetary Fund (IMF) report on Saudi Arabia offers
more praise and encouragement for the kingdom’s economic reforms.
The IMF executives said they were commending the Saudi authorities for
their push in implementing their economic and social reform agenda,
including the introduction of the value added tax and energy price reforms,
noting that the reforms have started to yield results and that the outlook for
the economy is positive.
A more muted outlook for the global economy and oil prices means that
Saudi authorities must persist with prudent macroeconomic policies and
appropriate prioritisation of reforms, which will be key to promoting non-oil
growth, creating jobs for nationals, and achieving the objectives of the
authorities’ Vision 2030 agenda.
Central to the development of the non-oil economy is nurturing of Saudi
workers, helping them to acquire skills for the private sector.
“They (the IMF directors) emphasised the need to ensure that wages and
productivity are well aligned and that labour market policies should focus on
setting clear expectations about the limited employment prospects in the
public sector, strengthening education and training, and increasing female
employment.”
The IMF expects the kingdom’s real non-oil growth to strengthen to 2.9%
this year amid government spending and private sector activity and as
ongoing reforms take hold.
“The fiscal deficit is projected to widen to 6.5 of GDP in 2019 from 5.9% of
GDP in 2018 as spending is projected to increase and exceed the budgeted
amount and offset an increase in non-oil revenues. The deficit is then
projected to decline to 5.1% of GDP in 2020,” the IMF said.
With the Saudi Arabia Monetary Authority cutting interest rates to match the
US Federal Reserve’s rate cut, the economy should receive more stimulus
amid monetary easing. With other central banks around the world also
cutting rates, the move should be supportive of oil prices, too.
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