The IMF cut its economic growth forecasts for Saudi Arabia yesterday, as the kingdom struggles to cope with low oil prices and a fiscal deficit of 19.5 per cent of GDP.
The Saudi economy will grow by 2.8 per cent this year, the IMF forecasts, down 0.2 percentage points from its previous estimate of 3 per cent this year. The country will grow by 2.4 per cent next year – slower than the IMF’s previous estimate of 2.7 per cent.
The collapse of the oil price from $110 in June 2014 to about $50 per barrel now has dramatically reduced oil revenues accruing to the kingdom, while the government ploughs ahead with infrastructure megaprojects designed to help the country reduce dependence on hydrocarbons.
That has torn a $150 billion hole in the government’s spending plans, with the kingdom set to run record deficits this year and next. The country’s foreign exchange holdings will last just over four years at current levels of spending, the IMF predicts.
Saudi Arabia issued approximately $5bn of bonds this year, with another $27bn expected before the year’s end, as the world’s largest oil exporter hopes to avoid further drawing down on its reserves.
The IMF called on Saudi Arabia to enact “comprehensive energy price reforms, firm control of the public sector wage bill, greater efficiency in public sector investment, and an expansion of non‑oil revenues, including by introducing a VAT and a land tax”.
The IMF issued its recommendations at the conclusion of its annual check-up on the country’s economy.
abouyamourn@thenational.ae
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