Saudi non-oil growth to pick up in 2017 on ‘bold’ reforms: IMF

Saudi Arabia’s non-oil growth is expected to pick up 1.7 percent in 2017 as its “bold” Vision 2030 economic reforms are implemented, the International Monetary Fund (IMF) said on Friday, adding that overall growth is expected to strengthen over the medium-term.

The consumer price index (CPI) inflation has turned negative in recent months, after seeing an increase in early 2016 due to higher energy and water prices. It is however likely to rise by next year as the value added tax is implemented, as well as energy price reforms and the recently introduced selective tax.

The fiscal deficit is projected to decline from 17.2 percent of Gross Domestic Product (GDP) in 2016 to 9.3 percent of GDP in 2017 and to less than 1 percent of GDP by 2022.

“This assumes that the major non-oil revenue reforms and energy price increases outlined in the Fiscal Balance Program are introduced on schedule and that operational and expenditure savings identified so far by the Bureau of Spending Rationalizations are realized,” the IMF said.

The current account balance is expected to surplus in 2017 as oil export revenues increase, and import growth and remittance outflows remain relatively subdued, the report added.

Meanwhile, credit and deposit growth are weak, and are expected to recover gradually. 

The overall real GDP growth is expected to be close to zero as oil GDP declines in line with Saudi’s commitments under the OPEC output cut agreement.

“Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place,” the IMF added.

The Fund has also welcomed the Saudi Arabian’s Monetary Authority’s (SAMA) steps to strengthen its regulatory and supervisory frameworks.