DUBAI — The International Monetary Fund (IMF) on Wednesday maintained its economic growth forecast for Saudi Arabia amid concerns the global economy may be heading towards a recession.
Saudi Arabia’s economy was still projected to grow by 7.6% this year, which the IMF said would likely be one of the fastest rates in the world, while inflation was expected to be 2.8%. Saudi Arabia’s government has projected its economy to grow by 7.4% this year.
Saudi Arabia, the world’s biggest oil exporter, is benefiting from higher oil prices as global demand continues to outstrip production following the pandemic-induced downturn.
The IMF said it expected the kingdom’s non-oil gross domestic product to grow by 4.2% this year. Next year, real GDP was forecast to increase by 3.7% and non-oil GDP to expand by 3.8%.
The Fund said in a report that Saudi Arabia’s fiscal performance this year would outperform the budget and for the first time since 2013 there would be a fiscal surplus of 5.5% of GDP.
The IMF said the fallout from Russia’s invasion of Ukraine had so far been limited for Saudi Arabia and that inflation there was contained. It also said the kingdom should maintain control of state spending despite higher oil revenues, though it said there was “scope for more targeted social spending.”
Saudi Arabia government officials have said government expenditure would be decoupled from oil revenues after decades of oil-driven spending and cut backs.
IMF Mission Chief Amine Mati told reporters Saudi Arabia could increase non-oil revenue by taxing income or property, which did not currently exist, and should be considered by the government.
He also said that the IMF believed that Saudi Arabia should maintain its 15% value-added-tax (VAT), which the kingdom imposed in 2020 though officials have since said could be lowered.
Asked if the IMF’s forecast could later be revised given fears of a global recession and the recent drop in oil prices, Mati said: “We at this stage do not expect any changes.”
The IMF in July cut global growth forecasts, warning https://www.reuters.com/business/imf-cuts-global-growth-forecasts-warns-high-inflation-threatens-recession-2022-07-26 that risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked. (Reporting by Alexander Cornwell; Editing by Alexander Smith and David Evans)