RIYADH: Saudi Arabia is expected to see a decline in growth to 0.4 per cent in 2017, compared with a growth of 1.4 per cent in 2016, an IMF report said. The kingdom is expected to grow at 2.3 per cent in 2018. The Middle East, North Africa, Afghanistan and Pakistan region is also expected to see a fall in growth this year compared to last year, according to the latest IMF report.
The IMF January 2017 World Economic Outlook forecasts a growth of 3.1 per cent this year for the region, compared with 3.8 per cent in 2016. The region is expected to see a growth of 3.5 per cent in 2018. Questioned at a press conference what are the reasons behind cutting the 2017 forecast for Saudi Arabia even as the expected rise in oil prices provide room for government spending, an IMF official said Saudi Arabia relies on oil revenues for a very sizable fraction of its exports and its government revenues, and, hence, the impact of lower oil prices on the economy is very strong. And thre has been, in 2016, a very sharp slowdown in growth. The kingdom had growth just of 1.4 percent. The forecast for 2017 depends, of course, on the behaviour of both the oil part of the economy and the non-oil part of the economy, the official said. “As in regard to the oil part of the economy, we have the impact of the agreement between major producers which is an agreement to curtail to some extent oil supply, and hence less oil production is going to mean less output from the oil sector even if prices are a little bit higher,” the official said.
With regard to the non-oil economy, Saudi Arabia is embarking on a very ambitious structural reform programme, but also a very sizeable fiscal consolidation because of the decline in oil revenues. So there is a big adjustment in spending downwards. There is an adjustment in taxes upwards, and as a result the non-oil growth is not going to be as buoyant as it was during period of strong oil prices, she said. “Clearly, a bit higher oil prices help on the revenue front, but there is a lot of ground to be made in order to close the fiscal deficit that has opened with the decline in oil prices.”
