Saudi real GDP forecast to grow 2.1% in 2021, 4.8% in 2022: IMF

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Saudi Arabia’s real gross domestic product (GDP) is expected to grow 2.1% this year and 4.8% in 2022, the International Monetary Fund (IMF) said.

It added that real non-oil GDP growth rebounded in the second half of 2020 and high-frequency indicators suggest the recovery has continued in 2021.

The IMF also expects non-oil growth at 3.9% in 2021 and 3.6% in 2022 compared to a contraction of 2.3% in 2020.

Given the production levels agreed by OPEC+, the Saudi real oil GDP growth is expected to reach -0.5% in 2021, compared to -6.7% in 2020 and 6.8% in 2022 as the OPEC+ agreement is assumed to end as announced.

IMF also stated that the Kingdom's budget for 2021 aims to substantially reduce the fiscal deficit. It expects the fiscal deficit to decline to 4.2% of GDP this year, slightly lower than the budget forecast, and over the medium-term (by 2026) to move to broad balance given the outlook for the global oil market and the government's fiscal policy plans.

The increase in value-added tax (VAT) rate, coupled with the removal of the cost-of-living allowances, the increased focus on the efficiency of capital spending, and planned further domestic energy price reforms are all important contributors to the planned fiscal adjustment and should not be reversed or delayed, the IMF added.