IMF Executive Board Concludes 2014 Article IV Consultation with Saudi Arabia

Press Release No. 14/356
July 21, 2014

On July 11, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Saudi Arabia.

Saudi Arabia has been one of the best performing G-20 economies in recent years, and has supported the global economy through its stabilizing role in the global oil market. Generous financial assistance has also been provided to countries in the Middle East region and beyond.

The Saudi economy grew strongly by 4 percent in 2013, owing to robust growth in the non-oil private sector. The unemployment rate of nationals fell over the past year, especially among women. Inflation has eased to 2.7 percent in May 2014, largely reflecting lower food price inflation in line with international trends. Credit growth also eased but remained at robust levels. The economy has not been affected by global financial market volatility, and the banking system is well-capitalized and profitable. High oil prices and output have led to large fiscal and external surpluses and international reserves have increased. However, fiscal breakeven oil prices have risen owing to strong growth in public spending. Consistent with the exchange rate peg, monetary policy settings have remained unchanged.

Growth is projected to pick up to 4.6 percent in 2014. Private sector growth is expected to remain strong, and oil production is expected to be little changed from 2013. Large scale infrastructure projects and spending on housing will continue to support non-oil sector growth. Inflation is expected to remain subdued.

The Saudi population is young and increasingly well-educated, and as it continues to enter its working-age years, there is tremendous opportunity to boost growth and raise living standards further. Against this background, government policies are focused on increasing private sector employment of nationals, addressing housing needs, strengthening transportation infrastructure, and diversifying the economy.

Executive Board Assessment2

Executive Directors welcomed Saudi Arabia’s robust economic performance underpinned by strong fundamentals. The growth outlook remains positive and risks are balanced, centered mainly on the global oil market. Directors commended Saudi Arabia’s systemic and stabilizing role in the global oil market, and its generous financial assistance to countries in the region and beyond.

Directors noted that Saudi Arabia’s fiscal position is strong, with one of the lowest debt-to-GDP ratios and largest fiscal surpluses in the world. They generally saw merit in slowing, over time, the pace of government spending and increasing non-oil revenues so as to preserve fiscal buffers, while striking a balance between achieving current development goals and ensuring intergenerational equity. Directors encouraged the authorities to set the budget within a medium term fiscal framework that is anchored around estimates of structural oil revenues and that fully integrates the expenditure priorities from the national development plan. They welcomed efforts to strengthen public spending efficiency and the plan to establish a macro-fiscal unit.

Directors underscored that an upward adjustment in energy prices would support a strong fiscal position and the efficient use of energy. The price adjustment should be well-planned and communicated, while ensuring that vulnerable groups are not adversely affected.

Directors agreed that the current monetary and macroprudential policy stance are appropriate, but called for careful monitoring of rising equity prices and the rapid increase in mortgage lending. They saw merit in the introduction of a formal macroprudential framework to help ensure economic and financial stability, codify coordination across regulators, and better enable the use of macroprudential tools in a countercyclical way. They also saw scope for refining liquidity management. Directors agreed that the exchange rate peg to the U.S. dollar remains appropriate for the Saudi economy.

Directors noted that the banking system is well-capitalized, profitable, and liquid. They encouraged the authorities to take further action to deepen capital markets, including the development of a benchmark yield curve, and promote financial inclusion. Directors supported the ongoing work to finalize the framework for systemically important banks and bring the AML/CFT framework in line with the CFT law.

Directors noted that labor market programs have contributed to increased employment in the private sector, but saw a need for further action to reduce the reliance on public sector jobs. Continued efforts to upgrade skills of workers through education and training will be important in this regard. Directors welcomed the steps to target the government’s housing program on the less well-off, and encouraged the authorities to ensure that the program does not impede the development of private real estate and mortgage markets. Directors supported continued efforts to diversify the economy by improving the business environment, investing in infrastructure, and increasing finance for SMEs. They noted that additional incentives for firms to export and for Saudi workers to participate in the private sector would also boost diversification.

Saudi Arabia: Selected Economic Indicators, 2010–14
  2010 2011 2012 2013 2014








Production and prices

(Annual percent change; unless otherwise stated)

Real GDP

7.4 8.6 5.8 4.0 4.6

Real oil GDP

0.3 11.0 5.7 -1.0 0.6

Real non-oil GDP

9.5 7.9 5.8 5.3 5.6

Nominal GDP (billions of U.S. dollars)

527 670 734 748 779

Consumer price index (avg)

3.8 3.7 2.9 3.5 2.9

Fiscal and Financial variables

(Percent of GDP; unless otherwise stated)

Central Government revenue

37.5 44.5 45.3 41.2 40.2

Of which: oil revenue

33.9 41.2 41.6 36.9 35.8

Central Government expenditure

34.0 33.4 33.3 35.4 37.6

Fiscal balance (deficit -)

3.6 11.2 12.0 5.8 2.5

Non-oil primary balance (percent of non-oil GDP)

-54.1 -60.9 -59.5 -59.5 -61.3

Broad money (annual percent change)

5.0 13.3 13.9 10.9 11.0

External sector

(US$ billions; unless otherwise stated)


251.1 364.7 388.4 377.0 377.8

Of which: Oil and refined products

215.2 317.6 337.5 323.1 320.3


-97.4 -120.0 -141.8 -152.7 -163.3

Current account

66.8 158.6 164.8 134.3 120.2

Current account (percent of GDP)

12.7 23.7 22.4 17.9 15.4

SAMA’s net foreign assets

440.4 535.2 647.6 716.7 768.5

SAMA's net foreign assets (in months of imports

26.7 29.8 33.9 35.2 35.4

of goods and services)


Real effective exchange rate (percent change)1

-0.2 -3.5 2.7 2.0 -1.4

Sources: Country authorities; and IMF staff estimates and projections.

1/ Latest 2014 data is for end-April.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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