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May 2022

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ECONOMIC TRENDS

 

Despite the risks of inflationary pressures, the country’s economy appears to be buoyant, thanks to increased activities in oil and non-oil sectors.

PETROCHEMICALS

 

The sector has been buoyed by subsidised raw materials, increasing oil prices, and rising demand worldwide.

AVIATION

 

Keen to jumpstart the tourism and travel sector, the kingdom is focusing on raising competitiveness by improving infrastructure and service delivery.

TRADE

 

Overall merchandise exports posted double-digit expansion in the second month of 2022 as the kingdom’s ports witnessed huge demand.

SME

 

The latest initiative is a boon for small and medium businesses, which are crucial to the government’s economic diversification goal.

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 IN THIS EDITION

Saudi Arabia is enjoying an economic boom, with its first quarter GDP surging 9.6% – its best performance in a decade.

Capital Economics expects the kingdom’s economy to grow 10% this year, attributing future growthto the expected rise in oil sector output, and the likelihood of a more relaxed fiscal policy. The country’s oil production stood at 10.3 million bpd in March, which was a boon for the economy given that oil prices have reached triple digits.
 

But the global economy is at a crossroads. High inflation, rising commodity prices, shortage of key raw materials, supply-chain constraints, and global tensions are putting pressure on recovery.

The global economy was already slowing before the latest challenges. After reaching an estimated 5.5% in 2021, global growth is expected to slow to 4.1% in 2022 and 3.2% in 2023, according to the World Bank.

The projected slowdown reflects intermittent COVID-19 flare-ups. Other factors, such as exhaustion of pent-up demand, reduced monetary and fiscal policy support, and lingering supply disruptions are also expected to further dampen growth. These forecasts masked uneven prospects, with that of emerging economies lagging substantially behind advanced economies.

At a G20 Finance Ministers and Central Bank Governors' (FMCBG) meeting in April, Saudi minister of finance Mohammed Al-Jaddan discussed the downside risks to the global economic outlook, highlighting the importance of international co-operation to support global economic recovery and safeguard against downside risks. Saudi Arabia is continually supporting countries and people in need, Al-Jaddan noted

The International Monetary Fund (IMF) is also concerned that as advanced economies lift policy rates, risks to financial stability, as well as to emerging market and developing economies’ capital flows, currencies, and fiscal positions – especially with debt levels having increased significantly in the past two years – may emerge.

Policymakers need to work hard to ensure inclusive growth.

“Monetary policy in many countries will need to continue on a tightening path to curb inflation pressures, while fiscal policy – operating with more limited space than earlier in the pandemic – will need to prioritise health and social spending, while focusing support on the worst affected,” the IMF noted.

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