The International Monetary Fund (IMF) expects the Kingdom’s oil GDP to grow at 5.1% next year.
This is compared to its contraction of 4.6% in 2024.
IMF Gave Props To Economy
The solid rating mentioned in the IMF’s report comes on the back of an increase in private consumption and non-oil investment.
This comes despite the slowdown in oil GDP growth owing to the extension of the voluntary reduction in oil production this year.
It will be gradually recovered next year when the Kingdom is expected to restore production to 10 million barrels daily.
So What
The IMF expects non-oil GDP to grow by about 3.5% this year.
This will be coupled with a slowdown in investment growth before it rebounds again in 2025 and beyond.
The bounce back will be courtesy of expected investments by the Public Investment Fund, the country’s hosting of the 2027 AFC Asian Cup, the 2029 Asian Winter Games, and the 2030 World Expo.
This is part of the country’s efforts to diversify its economic activities, which are beginning to bear fruit, according to the fund.
Some Context
The IMF’s report indicated that precautionary macroeconomic policies and changes that brought about transformations in Saudi Arabia helped boost non-oil growth.
It added that the domestic economy adeptly traversed “geopolitical tensions” in the Middle East.
The fund welcomed the adjustment of funding requirements for Vision 2030 goals, seeing it as a way to maintain fiscal sustainability and external balance.
It also said it would lead to a re-prioritization of spending by accelerating the implementation of some projects and extending the timeline for others.
It is noteworthy that the unemployment rate in the Kingdom has reached its lowest levels historically, with the overall unemployment rate for Saudis dropping to 7.7% in the last quarter of 2023.
This is close to the Vision 2030 target of having rates reach 7% by decade’s end.
The Saudi economy saw the addition of more than one million jobs during 2023, most of which were in the private sector.
Now What
The IMF expects GDP growth to rise to about 4.5% next year, and to stabilize at 3.5% annually in the medium term.
It’s also estimated that the inflation rate will remain steady at 1.9% this year, supported by the dollar peg and supportive local policies.
The General Authority for Statistics recently reported that the annual inflation rate in Saudi Arabia remained at 1.6% for the third consecutive month during May.
This is mainly attributable to the increase in housing rents.
Residential rent rates increased 10.5% compared to last year. This was influenced by the rise in apartment rents by 14.3%.
This is due to the increasing influx of foreign workers into the country and major redevelopment plans in Riyadh and Jeddah.
