Saudi economy expected to pick up in 2020-2021: World Bank

Saudi Arabia’s Gross Domestic Product (GDP) growth rate will likely slow to 0.4% in 2019 driven by OPEC’s oil supply reduction, before rising to 1% in 2020 and 2.2% in 2021, according to a new report by the World Bank.

The World Bank report titled ‘Gulf Economic Update’ said that Saudi Arabia is expected to achieve current account surplus ranging from 5.9% of GDP in 2019 to 7.9% in 2021.

“Oil and gas still account for eight-tenths of Saudi Arabia’s goods exports, and the near-term trajectory of oil prices will determine the country’s trade and current account performance during the forecast period,” the report added.

The report further noted that rising domestic demand in the Kingdom by the private sector and increased public infrastructure spending will likely bolster imports, narrowing the trade surplus.

The World Bank report maintained that Saudi Arabia was originally expected to reduce its fiscal deficit from 5.9% of GDP in 2018 to 4.1% by 2021, a target that the government has recently revised upward to 5% according to the pre-budget statement for fiscal year 2020.

To achieve its fiscal objectives, the World Bank report recommended that Saudi Arabia focuses in the future on implementing additional energy and water price reforms; reducing the public sector’s wage bill, targeting social benefits more effectively, improving public expenditure efficiency, as well as better prioritizing capital spending.

For the overall GCC region, the report forecast that economic growth in 2019 will be modest but projected to gradually accelerate in 2020 and in 2021.

“Growth in 2020-21 will be driven by capital investment and household consumption, as strategic investments designed to promote diversification will accelerate, while private economic activity will pick up,” the report added.

The World Bank had ranked Saudi Arabia among the world’s top 10 improvers in its ‘Doing Business 2020’ report released in October 2019.