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The International Monetary Fund (IMF) reiterated its support of the government’s recalibration of some of the national gigaprojects, some of which projects will be downsized and others will have a longer delivery time, according to a report from the multilateral lender (pdf). “This welcome exercise will help ensure proper sequencing of spending to reduce overheating risks and maintain macroeconomic stability and fiscal sustainability,” the report reads. The report is an annual review of the health of our economy, also known as Article IV consultations.
BACKGROUND- A government committee led by Crown Prince and Prime Minister Mohammed bin Salman is reportedly wrapping up a review of gigaprojects with a view to trimming spending at some. This comes as officials continue to hammer the idea of preventing the economy from overheating on the back of its economic diversification push while also saying they’re willing to accept modest fiscal deficits as the price of pursuing long-term diversification.
The lender expects Saudi’s overall GDP growth to rise to 4.7% in 2025 “assuming the 1 mbpd voluntary oil production cuts will be gradually phased out from October 2024 to September 2025. The IMF then expects annual growth to average at 3.7% in the following years. Non-oil GDP growth is expected to reach 3.5% in 2024, and 3.9-4.4% by 2025, with potential growth up to 8% if the National Industrial Strategy is successfully implemented.
Other forecasted figures: Inflation is projected to remain around 2% over the medium term, supported by the USD peg, domestic subsidies, and a flexible supply of expat labor. Saudi’s current account surplus is expected to shift to a deficit starting this year, averaging 2.2% of GDP from 2026 to 2029. Finally, the IMF expects our foreign reserves to fall to USD 483 bn by 2029, but will remain 144% above the IMF’s recommended level, covering 13.4 months of imports.
