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Saudi’s economy remains robust on the back of the government’s diversification plans, IMF Managing Director Kristalina Georgieva told CNBC Arabia (watch, runtime: 0:48), days after the Washington-based lender trimmed Saudi’s growth outlook forecast. The source of GDP growth in the past years was mainly driven by growth in the non-oil sector, Georgieva said. She called on the government to find a balance between the utilization of reserves and tapping the debt markets.
The non-oil economy will continue to drive growth: “The engine of growth for Saudi and the GCC this year and next year will be the non-oil sector,” IMF Middle East and Central Asia Director Jihad Azour told Al Arabiya TV (watch, runtime: 1:44).
BACKGROUND- For the first time, non-oil activity accounted for 50% of the Kingdom’s real GDP in 2023, fueled by a sharp increase in investments, consumption and export volumes, government data showed last month. The non-oil economy came in at SAR 1.7 tn last year.
Voluntary oil cuts to blame for slight outlook downgrade by the IMF: Azour said the IMF recent (modest) cut to Saudi’s 2024 growth forecast came on the back of extended voluntary oil curbs by Opec+. His remarks came days after the IMF slightly trimmed its Saudi’s growth forecast to 2.6% this year, down from the 2.7% it had penciled-in back in January. The IMF raised its Saudi GDP growth forecast for 2025 to 6.0%, up from the 5.5% projected earlier this year.
STILL- Ongoing structural reforms coupled with a wave of investments will have a positive impact on growth, Azour said. “A rise in oil output level and exports will boost GDP growth and improve the balance of payments,” he said.
ALSO FROM SPRING MEETINGS-
#1- The IMF’s steering committee, chaired by Finance Minister Mohammed Al Jadaan, fell short of agreeing on a joint communique on the economic risks posed by ongoing global conflicts, Reuters reported. The committee discussed the impact of the war in Ukraine, Gaza and shipping disruptions in the Red Sea on the global economy, according to a statement by Al Jadaan. “While recognizing the IMFC is not the forum to resolve geopolitical and security issues and these issues will be discussed in other fora, IMFC members acknowledged that these situations have significant impacts on the global economy. Today’s era must not be of war and conflict” he said.
What went down: Nordic countries unanimously voted against the adoption of a joint communique because it failed to explicitly mention Russia, Finnish Finance Minister Riikka Purra told reporters. “It was not possible for us to approve a joint communique which did not explicitly and directly mention Russia, which wages a war in Ukraine that has all kinds of economic consequences across the world,” she said.
#2- The IMF is concerned about debt burdens by low-income countries, Reuters reported, citing statements by Georgieva. She said some of the vulnerable countries were now seeing debt service payments of 12% in comparison to 5% a decade earlier. “What is heartbreaking is that in some countries debt payments are up to 20% of revenues,” she said. She said that a push by the IMF and the World Bank this week for timelines for debt restructuring would help streamline the process.
