Human capital critical to Saudi Arabia's reforms, IMF official says

IMF's mission chief to kingdom says private sector is 'growing quite a lot'

The kingdom's unemployment rate fell to a record low of 7 per cent in the fourth quarter last year, the IMF said. Getty Images

The International Monetary Fund said on Thursday that the workforce remains a key part of success for structural reforms in Saudi Arabia.

After the IMF's annual Article IV consultation with Riyadh this summer, the fund's executive board commended the structural reforms Saudi Arabia has implemented since 2016. The board noted in particular improvements in the regulatory and business environment, human capital, female labour participation and governance.

“Improving human capital is critical. [The] authorities are aware of it," Amine Mati, the fund's mission chief to Saudi Arabia, said during an event at the Arab Gulf States Institute in Washington.

Mr Mati acknowledged that "it's going to take some time”, but also pointed to the need for a labour force that can help support Saudi Arabia's growing ambitions in artificial intelligence.

The kingdom announced a major investment in AI earlier this year through a new company, Humain. AI is part of Saudi Arabia's Vision 2030 project, its strategy for social reform and economic diversification.

The kingdom's unemployment rate also fell to a record low of 7 per cent in the fourth quarter last year, beating the original timeline set by 2030. That target has now been set to 5 per cent.

The fund said the lower unemployment rate has been broad-based, with unemployment among female and youths declining by half over four years.

“When we talk about low unemployment and the progress in Saudi Arabia, a lot of people say, 'Oh, is this coming from the public sector?' No, actually, private sector is growing quite a lot,” Mr Mati said.

The fund projects Saudi Arabia's economy to grow at 3.4 per cent this year before expanding slightly faster to 3.5 per cent in 2026.

Mr Mati also noted the kingdom's economy remained strong despite geopolitical challenges, including the 12-day conflict between Israel and Iran.

Saudi Arabia's economic strength reflected the broader resilience shown within the Gulf Co-operation Council among these geopolitical developments, he said.

“What has happened in terms of the domestic economy, really, domestic-driven, Saudi story in terms of the economy have been the driver of what's happening,” Mr Mati said.