## Press Release: IMF Mission Statement at the Conclusion of Article IV Discussions with Saudi Arabia

_IMF News, May 20, 2013_

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## Bibliographic details
- Published: May 20, 2013

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### Mission and context
- IMF team led by Mr. Tim Callen, IMF Mission Chief to Saudi Arabia, held discussions during May 5-18 on the 2013 Article IV Consultation with Saudi Arabia.
- Press Release No. 13/184; dated May 20, 2013.

### Recent economic performance and outlook
- Saudi Arabia described as one of the best performing economies of the G-20 in recent years.
- Average rate of real GDP growth during 2008-12 ranked third behind China and India.
- Projections for 2013:
  - Non-oil private sector projected to grow by 7.6 percent in 2013.
  - Overall GDP growth expected at 4.4 percent.
- Drivers and constraints noted:
  - Oil output likely to be lower than its average level in 2012.
  - Growth rate of government spending looks set to slow.
  - Lower oil output and oil prices will likely result in smaller fiscal and current account surpluses in 2013, though surpluses will remain substantial.
- Inflation:
  - Inflation has picked-up since the middle of 2012 due to higher food prices and price increases in restaurants, hotels, and transportation, but remains contained at 4 percent.

### Global and regional role
- Saudi Arabia plays a systemic role by helping provide stability to the global oil market.
- The country increased oil production in 2011 and 2012, helping prevent supply disturbances in other countries from negatively impacting global growth.
- Within the Middle East region, Saudi Arabia is a generous provider of financial assistance.
- Large remittance flows from expatriates working in the country provide important income flows to countries in the region and in south Asia.

### Demographics, labor market, and structural challenges
- The Saudi population is young and increasingly well-educated as it enters working-age years, presenting opportunities to boost growth and raise living standards.
- Challenges highlighted:
  - Creating jobs for the growing Saudi population of working age is a key priority.
  - Addressing housing needs.
  - Managing demand on natural resources.
- Ongoing and recommended policy directions:
  - Initiatives advancing to increase employment of nationals in the private sector and provide support to jobseekers.
  - Increased employment of Saudis in the private sector will require:
    - Reduced reliance on jobs in the public sector.
    - Measures to increase competitiveness of Saudi workers, including continued efforts to strengthen education and training.
    - Expanded opportunities for women.
  - Maintaining strong growth in the private sector is important for job creation.
  - Government investment in infrastructure, particularly transportation.
  - Measures aimed at strengthening the small and medium-sized enterprise (SME) sector.

### Energy consumption and pricing
- With a growing population, domestic energy consumption is likely to continue to grow strongly.
- Government responses include improving energy efficiency and developing alternate energy sources.
- IMF mission view:
  - An upward adjustment of energy prices over time will likely be needed to curb the growth of domestic energy consumption.
  - International experience suggests energy price reform needs to be well-planned, phased, and clearly communicated.
  - Implementing mitigating measures to protect lower income groups is essential.

### Macroeconomic vigilance and policy sequencing
- Macroeconomic policies should remain vigilant for signs that continued strong economic growth is leading to increased inflationary pressures.
- Fiscal policy:
  - Government’s fiscal policy looks set to appropriately slow the pace of spending growth in 2013 after the large increases in 2011 and 2012; this will help contain demand pressures.
- Contingent measures:
  - If inflation were to pick up more than expected or evidence of supply bottlenecks were to emerge, then either macro-prudential policy would need to be adjusted or capital spending projects slowed.

### Fiscal position and reform agenda
- Fiscal position characterized as very strong:
  - In recent years, the government has run large budget surpluses, reduced debt to very low levels, and built up considerable financial assets.
  - Budget management has been considerably strengthened.
- From this position of strength, the IMF encourages the government to consider further fiscal reforms.
- Specific recommendation:
  - Further develop fiscal tools, including those dealing with oil price uncertainty.

*Source: IMF Mission Statement at the Conclusion of Article IV Discussions with Saudi Arabia (Press Release No. 13/184, May 20, 2013).*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr13184_