Saudi Ministry of Finance: IMF officials affirm the ongoing recovery of the Saudi economy

Riyadh, SAUDI ARABIA, March XNUMX / PRNewswire / - IMF officials have reiterated the continued recovery of the Saudi economy and slowdown in consumer price index (CPI) inflation, forecasting GDP growth (excluding oil) to reach 4,3% this year and 2022% in 3,6 . The IMF expects the private sector to lead growth this year at 5,8%, and that it will continue with an average growth of 4,8% in the medium and long term. This statement can be found in the final report of the Article IV 2021 consultation, which was recently published. The staff praised the Saudi government's quick and determined response to the COVID pandemic. The early establishment of a Supreme Crisis Committee to steer and coordinate efforts between government agencies, as well as the ambitious reforms that have already been implemented as part of the Saudi Vision 2030, played a crucial role in coping with the pandemic caused by the Saudi economy, the increasing digitization of government and financial services, reforms to increase labor market mobility and strong political buffers meant the economy was well equipped to tackle the COVID crisis. In addition, the “Private Sector Financing Support Program” launched by the Saudi central bank helped SMEs cope with the challenges of the pandemic.

The IMF staff also reiterated that the measures to support the non-oil economy were successful, that the creation of the High-Level Crisis Response Committee was central to effective and proactive management of the crisis, and that strict measures were taken to ensure Early containment and health care incidents and limited deaths.

In terms of current economic performance, employees believe the “Shareek” partnership program will provide incentives through the tax system, access to credit and regulatory reforms to encourage investment. They also believe that the labor market reforms (abolition of the Kafala sponsorship system) will result in a more competitive labor market that is more attractive to more highly skilled expatriates. With regard to the ongoing reforms to promote female employment, employees expect the female participation rate to rise further (up 13 percentage points over the past two years to over 33 percent). Lending to the private sector will also grow strongly, according to employees' forecasts, boosted by lending to housing and SMEs. Staff believe the new Social Security Act will be an important step in strengthening the framework for providing income support to the less affluent.

The IMF staff pointed out that the renewable energy potential in Saudi Arabia is huge and will attract domestic and foreign private investors. The staff welcomed the high-level announcement of the Saudi climate strategy and the commitment of the country's leadership to reducing greenhouse gas emissions.

On the subject of public finances and transparency, the IMF staff confirmed that significant progress has recently been made in increasing accountability and transparency in public procurement, including through the "Etimad platform". They praised the impressive pace of capital market reforms to increase the liquidity and depth of local stock and bond markets, including better access for foreign investors and the introduction of financial derivatives. The staff indicated that the liquidity of the banking system is at a very comfortable level.

The Concluding Statement of the Article IV Consultation 2021 touched on the topics of financial inclusion and fintech and pointed out that the fintech sector in Saudi Arabia is maturing rapidly with the support of SAMA and the CMA. The final statement noted that pegging to the exchange rate is still the best option as Saudi Arabia has high reserves that are more than sufficient to keep the peg in place.

His Excellency the Finance Ministers, Mr Mohammed Al-Jadaan, said that the final declaration highlights the current and future indicators of the Saudi economy and that it has managed to overcome many of the obstacles and challenges the world is facing this year and last Has. This helped achieve financial sustainability, which increased the resilience and strength of the economy. His Excellency emphasized the crucial role of the economic and structural reforms implemented by the Saudi government as part of the Saudi Vision 2030 and the impact they have had on achieving a sustainable and comprehensive economy. IMF staff also commended the kingdom's efforts to mitigate the economic, social and health effects of the COVID-19 pandemic.

It is noteworthy that the IMF staff mission previously issued a statement concluding the 2021 Article IV consultation for the Kingdom of Saudi Arabia, which took place in April 2021. This concluding remark confirms the first results to which the previous declaration has led.