Saudi Arabia's swift response to the Covid-19 pandemic has softened the blow of the global crisis on the Arab world's largest economy, which is now expected to grow by 2.4 per cent this year and by 4.8 per cent in 2022, , the International Monetary Fund said.
The growth will be buttressed by a strong rebound in the kingdom's non-oil sector and investment from its sovereign wealth fund, the Public Investment Fund.
The kingdom's non-oil economy is projected to grow 4.3 per cent this year, the fund said in a statement on Thursday. Saudi Arabia is Opec's biggest producer and the world's largest exporter of crude.
"The Saudi economy entered the Covid-19 pandemic with strong policy buffers and reform momentum. The authorities responded quickly and decisively to the crisis with a range of fiscal, financial and employment support programmes that helped cushion the impact of the pandemic on the private sector," the IMF said. "The economy is recovering well. The non-oil recovery that started in the second half of 2020 is expected to continue."
Support from the PIF and strong domestic demand will propel economic growth, the fund said.
The PIF is a seminal part of the kingdom's Vision 2030 initiative, which seeks to diversify the economy, nurture local industry, create jobs and reduce the reliance on oil revenue.
In January, the sovereign wealth fund unveiled a five-year strategy, with the aim of doubling its assets to $1.07 trillion and investing a minimum of $40bn a year into the domestic economy until 2025. The investment is expected to create 1.8 million jobs and contribute $320bn to the kingdom's non-oil economy.
The fund also plans to grow assets under management to over $2tn by 2030.
The kingdom's economic diversification also includes an expansion of entertainment complexes in different locations across the country to boost leisure tourism, a sector it is investing billions of dollars in.
In 2017, the PIF set up the Saudi Entertainment Ventures Company, known as Seven, to invest and build 20 entertainment destinations, 50 cinemas and two large theme parks in prime locations across the kingdom.
"Strong reform momentum is continuing. The rapid increase in labour market participation of Saudi females and reforms to the Kafala sponsorship system for expatriate workers are very important to boost growth, productivity and household incomes," the IMF said.
"Further, the programme to codify legal practices ... the deepening of the domestic capital markets, reforms for e-government and to harness the potential of digitalisation, and the support to SMEs and entrepreneurs are all important to support a more diversified and inclusive recovery."
The kingdom's General Authority for Statistics said earlier this month that the unemployment rate among Saudi nationals stood at 11.7 per cent in the first quarter of this year, down from 12.6 per cent in the fourth quarter of 2020.
The fall was largely due to higher levels of employment among women, with the female unemployment rate falling to 21.2 per cent, from 24.4 per cent in the previous quarter.
Riyadh-based investment bank Jadwa last week revised its unemployment forecast for the end of this year down to 10.5 per cent, from 12.1 per cent previously.
Inflation in the kingdom is estimated at 3.2 per cent this year and is expected to fall to 2.1 per cent in 2022, according to the IMF.
The fund's executive directors said the Saudi riyal's exchange rate peg to the US dollar "continues to serve the economy well, given the current economic structure".