Statement at the Conclusion of the 2011 Article IV Consultation Mission to Saudi Arabia
May 31, 2011Press Release No. 11/205
May 31, 2011
Mr. Masood Ahmed, Director of the Middle East and Central Asia Department, made the following statement today summarizing the findings of the 2011 Article IV Consultation mission that visited Riyadh during May 10–25:1
“The Saudi economy has continued to strengthen in 2010 and early 2011, driven by a strong increase in non-oil GDP reflecting a rebound in the private sector supported by increased government spending and a recovery in global demand and higher oil prices as the world economy emerges from the global financial crisis. Overall real GDP growth rose from 0.1 percent in 2009 to 4.1 percent in 2010. Profitability of corporates listed on the stock exchange also improved significantly in 2010—net profits were 56 percent higher than in 2009. The banking sector continues to hold capital above statutory requirements and credit growth is rising. With government spending and oil production now also increasing, available leading indicators point to a further strengthening of activity in the first quarter of 2011.
“Looking ahead, the economy is poised for continued robust growth. Oil production is increasing further to compensate for lower output elsewhere in the region. As a result, both fiscal and external balances are likely to register strong surpluses. Reflecting the positive momentum, overall real GDP growth is projected by the IMF to reach 6.5 percent in 2011 with inflation likely to rise to about 6 percent as a result of both domestic and imported factors.
“The strong near-term economic outlook provides an opportunity to address longer-term priorities. As emphasized in recent Royal Decrees, high among these are providing jobs and housing for the growing population. Key steps will be to continue progress in diversifying the economy, building on the positive business environment, and continuing to improve access to finance for SMEs as well as for housing. The new policy initiatives entail spending commitments over the next several years which will reduce fiscal surpluses and it will be important that the additional spending be undertaken in a way that complements private sector activity. Ensuring the efficiency of public spending will be key to realizing an appropriate return from the increased government investments.”
1 In accordance with Article IV of its Articles of Agreement, the IMF holds bilateral consultations with its members, generally once a year. An IMF staff mission visits the country, gathers economic and financial data, and meets those responsible for the country's economic development and policies. Once they have returned to headquarters, the members of the mission draw up a report to be submitted to the Executive Board for review. Following this review, the Managing Director, as Chairman of the Executive Board summarizes the opinions of the Executive Directors, and this summary is forwarded to the country's authorities.