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Saudi Arabia’s real non-oil growth is expected to strengthen to 2.9% in 2019 helped by an increase in government spending and confidence, according to the International Monetary Fund (IMF). However, real GDP growth is expected to slow to 1.9% as real oil growth weakens to 0.7% with the implementation of the Organization of the Petroleum Exporting Countries (OPEC)+ oil production agreement.
The fund said in a report after its executive board completed an Article IV Consultation with Saudi Arabia that GDP growth will accelerate in the medium term, projected to rise to 3% in 2020 as the kingdom progresses with ongoing reforms. These reforms include increasing fiscal transparency, improving legal frameworks, pressing on with VAT implementation, and supporting SME sector growth, among others. IMF Directors noted that reforms have started to yield results and that the outlook for the economy is positive; however, volatility in global oil prices poses uncertainty.
They further said ongoing efforts to strengthen the business environment and careful implementation of industrial policies could encourage the development of new sectors of the non-oil economy.
Saudi Arabia’s fiscal deficit is projected to widen to 6.5% of GDP in 2019 from 5.9% of GDP in 2018 as spending is projected to increase and exceed the budgeted amount. The deficit is then projected to decline to 5.1% of GDP in 2020. The directors encouraged the authorities to build on their fiscal reforms and continue with the planned energy and water price reforms, along with the increases in expatriate labour fees. They also highlighted that containing the government wage bill and a more measured increase in capital spending could yield fiscal savings.
In terms of unemployment figures, data showed that unemployment rate among Saudi nationals moved lower but remains high at 12.5%.
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