Saudi Arabia is “virtually the only country” that was able to successfully raise VAT from five to fifteen percent amid the challenging economic conditions brought about by the COVID-19 pandemic, the Kingdom’s Minister of Economy and Planning said.
The Gulf state was able to raise tax revenues without hampering the growth of the country’s economy, Faisal Alibrahim said during a panel at the World Economic Forum on Thursday.
“We look at simplifying tax revenues and utilizing them in a way that was never done before, but not at the expense of economic growth or economic development,” he said.
Saudi Arabia tripled VAT in July of 2020 near the height of global COVID-19 lockdowns that caused widespread supply chain disruption.
The move was originally intended as a temporary measure to bolster the economy. Finance Mohammed al-Jadaan said at last year’s WEF that the country will “ultimately” consider cutting VAT.
Almost three years later, the world faces a global recession, according to leading economists surveyed by the WEF.
Two-thirds of chief economists from the public and private sectors said a 2023 recession is likely, Reuters reported.
Despite recession fears, Saudi Arabia’s economy is looking well-placed to weather the worst of the storm.
After contracting by 4.34 percent in 2020, Saudi Arabia’s GDP grew by 3.92 percent in 2021, according to the country’s central bank. World Bank figures estimated growth of seven percent in 2022.
The Kingdom is “becoming a bright spot for the world economy,” International Monetary Fund (IMF) chief Kristalina Georgieva said during a WEF panel.
Saudi Arabia leads IMF world economic growth outlook projections for Middle Eastern and Central Asian countries in 2023, and one IMF report placed Saudi Arabia as one of the fastest-growing economies in 2022.
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