The International of Monetary Fund (IMF) stressed that the Kingdom of Saudi Arabia's economy has grown very strongly in recent years, benefitting from high oil prices and output, strong private sector activity, and government spending.
In 2014 Article IV Consultation-Staff Report issued recently, the IMF has confirmed that the Kingdom has played a systemic and stabilizing role in the global oil market.
The report also lauded the Kingdom's role in supporting the Middle East's economy and Asian countries through generous financial aid and big transfers of expatriate workers in the Kingdom.
The report added that the economic activity in 2013 continued in growing reaching 4% where the growing in the private sector (non-oil) is still strong reaching 6%, pointing out that the near-term outlook is positive, with growth projected to pick up to 4.5% in 2014 and 2015 in addition to a strong growing in the private sector due to great projects of the infrastructure.
The report is expected that the size of oil production is to continue at its current level.
IMF pointed out that risks to the growth outlook are broadly balanced and the macroeconomic policies are in a strong position to respond to these risks, adding that inflation has eased to 2.7% in May 2014, largely reflecting lower food price inflation in line with international trends.
The IMF report highlighted that inflation is expected to edge up to 3.6% by 2017, lauding the Kingdom's financial strong position where the rise of oil prices and increasing its production led to great surplus in the public finance which are enabled to decrease the government debt to less than 3% of GDP and increasing of international reserves.
The report pointed out that the strong public spending on the development and infrastructure projects in recent period contributed in decreasing those surplus, expecting that the public fiscal surplus is to decline further this year and the budget is projected to move into deficit in 2015.
The report emphasized the need for fiscal consolidation to help protect existing fiscal buffers and suggested that the fiscal adjustment could be achieved through a combination of expenditure and revenue measures.
The IMF report suggested that reforms to the fiscal framework would support policy implementation, help manage the impact of oil price volatility, and strengthen spending efficiency.
The report pointed out that the exchange rate peg to the US dollar remains appropriate for the Saudi economy.
The IMF noted that labor market programs have contributed to increased employment in the private sector where the unemployment rate of nationals has fallen over the past year.
The report saw a need for further action to reduce the reliance on public sector jobs, supporting the great efforts exerted by the government for diversification of economic activity by improving the business environment, investing in infrastructure, and increasing finance for small and medium enterprises (SMEs). IMF noted that additional incentives for firms to export and for Saudi workers to participate in the private sector would also boost diversification.© Copyright - Saudi Press Agency