The International Monetary Fund said on Thursday Saudi Arabia’s economy is recovering well from the COVID-19 pandemic and the fund expected the non-oil economy to grow by 4.3 percent this year, with overall GDP growth seen at 2.4 percent.
Real oil GDP is expected to shrink by 0.4 percent, the IMF said in a statement, as production is assumed to stay in line with an agreement between the Organization of the Petroleum Exporting Countries (OPEC), Russia and allies, known as OPEC+.
Saudi Arabia, the world’s biggest crude exporter, was pummeled by the double blow of last year’s historic oil price crash and the COVID-19 pandemic’s impact, though the economy showed signs of improvement from late in the year.
Investment by the kingdom’s sovereign wealth fund, the Public Investment Fund, is expected to offset government fiscal consolidation’s drag on growth, the IMF said. PIF’s investments are a central part of the country’s economic development program Vision 2030, which aims to wean the economy off oil.
The IMF’s executive directors “underscored the importance of monitoring fiscal risks and developing a robust sovereign asset-liability management framework given the growing role of the Public Investment Fund and public-private partnerships (PPP) in the economy.”
The directors also agreed that the Saudi riyal’s exchange rate peg to the US dollar “continues to serve the economy well given the current economic structure.”
“While fully agreeing with this, many directors also encouraged the authorities to review the peg over the medium term to ensure that it remains appropriate given the plans for economic diversification.”