{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Saudi Arabia",
  "publication": "IMF News, July 24, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/07/23/pr18304-imf-executive-board-concludes-2018-article-iv-consultation-with-saudi-arabia",
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  "summary": "Real GDP growth is expected to increase to 1.9 percent in 2018.",
  "publishDate": "2018-07-24",
  "sections": [
    {
      "heading": "Macroeconomic outlook and growth",
      "content": "- Real GDP growth is expected to increase to 1.9 percent in 2018.\n- Non-oil growth is expected to strengthen to 2.3 percent in 2018.\n- Growth is expected to pick-up further over the medium-term as the reforms take hold and oil output increases.\n- Risks are balanced in the near-term.\n- CPI inflation:\n  - Forecast at 3 percent in 2018.\n  - Expected to stabilize at around 2 percent over the medium-term.\n- Unemployment:\n  - Overall unemployment rate: 5.6 percent (2016), 6.0 percent (2017).\n  - Unemployment rate among Saudi nationals: 12.3 percent (2016), 12.8 percent (2017).\n  - Employment of Saudi nationals has increased, especially for women."
    },
    {
      "heading": "Fiscal outlook and public finances",
      "content": "- Fiscal balance (central government):\n  - Fiscal deficit projected to narrow from 9.3 percent of GDP in 2017 to 4.6 percent of GDP in 2018 and then to 1.7 percent of GDP in 2019.\n  - With oil prices implied by futures markets declining over the medium-term, the deficit is then projected to widen.\n- Financing:\n  - The deficit is expected to continue to be financed by a combination of asset drawdowns and domestic and international borrowing.\n- Public debt:\n  - Public debt (% GDP): 13.1 (2016), 17.2 (2017), 19.1 (2018), 20.3 (2019).\n- Central government finances (selected):\n  - Revenue (% GDP): 21.5 (2016), 24.1 (2017), 30.6 (2018), 31.7 (2019).\n  - Expenditure (% GDP): 38.7 (2016), 33.4 (2017), 35.2 (2018).\n  - Non-oil primary balance (% Nonoil GDP): -45.7 (2016), -39.7 (2017), -41.7 (2018), -36.9 (2019).\n- Directors’ fiscal guidance and recommendations:\n  - Aiming for a balanced budget by 2023 is appropriate.\n  - Importance of fully implementing revenue reforms and limiting future growth of government spending to achieve fiscal objectives.\n  - If oil prices exceed budget assumptions, most Directors recommended saving additional revenues to rebuild fiscal buffers.\n  - Encourage anchoring fiscal spending in a medium-term expenditure framework.\n  - Support ongoing civil service review to identify reforms to contain the wage bill.\n  - Welcome efforts to strengthen the medium-term fiscal framework, increase fiscal transparency, and develop macro-fiscal analysis.\n  - Emphasize integrated asset-liability management framework to guide government borrowing and investment decisions."
    },
    {
      "heading": "Revenue measures and price reforms",
      "content": "- Authorities have introduced the value-added tax (VAT) and implemented higher gasoline and electricity prices at the beginning of 2018.\n- Directors:\n  - Welcomed the introduction of the VAT and encouraged preparations to lower the VAT registration threshold in 2019.\n  - Supported gradual increases in energy prices and urged more communication about future price increases.\n  - Emphasized ensuring citizens’ accounts adequately compensate low and middle-income households for the impact of price increases."
    },
    {
      "heading": "External sector and reserves",
      "content": "- Current account:\n  - Expected surplus of 9.3 percent of GDP in 2018 as oil export revenues increase and remittance outflows remain subdued.\n  - Current account (% GDP): -3.7 (2016), 9.3 (2017), 8.8 (2018).\n- SAMA net foreign assets are expected to increase this year and over the medium-term.\n- Reserves (months imports): 32.3 (2016), 28.4 (2017), 29.2 (2018), 30.2 (2019).\n- External debt (% GDP): 28.9 (2016), 34.9 (2017), 35.7 (2018), 36.5 (2019).\n- Directors agreed that the exchange rate peg to the U.S. dollar continues to serve Saudi Arabia well given the structure of the Saudi economy."
    },
    {
      "heading": "Financial sector and credit",
      "content": "- Credit and deposit growth remain weak but are expected to strengthen due to higher government spending and non-oil growth.\n- Money and credit:\n  - Broad money (% change): 0.8 (2016), 0.2 (2017), 2.3 (2018), 2.8 (2019).\n  - Credit to the private sector (% change): 2.4 (2016), -0.8 (2017), 2.2 (2018).\n- Bank sector outlook:\n  - Bank profitability should increase as interest margins widen.\n  - Banks remain well capitalized and liquid.\n- Directors’ financial sector recommendations:\n  - Continue focus on financial development and inclusion.\n  - Prioritize increasing SME finance, improving financial sector access (particularly for women), and developing the debt market.\n  - Welcome SAMA’s efforts to strengthen liquidity management.\n  - Encourage continued strengthening of the Anti-Money Laundering/Countering the Financing of Terrorism framework."
    },
    {
      "heading": "Structural reforms, labor market, and private sector development",
      "content": "- Ongoing reforms include improving the business environment, developing a more vibrant SME sector, deepening capital markets, increasing involvement of women in the economy, and developing new industries with high potential for growth and job creation.\n- Directors’ structural reform guidance:\n  - Continue structural reforms in consultation with the private sector.\n  - Accelerate privatization and public-private partnership programs.\n  - Public sector can be a catalyst for new sectors but should not crowd-out the private sector.\n  - Policies to create jobs for nationals in the private sector should level the playing field between Saudis and expatriates.\n  - Additional measures: set clear expectations about public sector employment prospects, reform the visa system for expatriate workers, strengthen education and training, and address remaining constraints to female employment."
    },
    {
      "heading": "Selected economic indicators (2016–19)",
      "content": "- Population: 32.6 million (2017)\n- Quota: SDR 6,985.5 million (2.93% of total)\n- Literacy: 95% (2015, adults)\n- Main products and exports: Oil and oil products (77%)\n- Key export markets: Asia, U.S., and Europe\n- Table (selected series):\n  - Real GDP growth: 1.7 (2016), -0.9 (2017), 1.9 (2018), … (2019 not shown)\n  - CPI Inflation (%): 2.0 (2016), 3.0 (2017)\n  - Revenue (% GDP): 21.5 (2016), 24.1 (2017), 30.6 (2018), 31.7 (2019)\n  - Expenditure (% GDP): 38.7 (2016), 33.4 (2017), 35.2 (2018)\n  - Fiscal balance (% GDP): -17.2 (2016), -9.3 (2017), -4.6 (2018), -1.7 (2019)\n  - Public debt (% GDP): 13.1 (2016), 17.2 (2017), 19.1 (2018), 20.3 (2019)\n  - Non-oil primary balance (% Nonoil GDP): -45.7 (2016), -39.7 (2017), -41.7 (2018), -36.9 (2019)\n  - Broad money (% change): 0.8 (2016), 0.2 (2017), 2.3 (2018), 2.8 (2019)\n  - Credit to the private sector (% change): 2.4 (2016), -0.8 (2017), 2.2 (2018)\n  - Current account (% GDP): -3.7 (2016), 9.3 (2017), 8.8 (2018)\n  - FDI (% GDP): 1.2 (2016)\n  - Reserves (months imports): 32.3 (2016), 28.4 (2017), 29.2 (2018), 30.2 (2019)\n  - External debt (% GDP): 28.9 (2016), 34.9 (2017), 35.7 (2018), 36.5 (2019)\n  - REER (% change): 4.8 (2016), -5.1 (2017), -5.4 (2018)\n  - Unemployment rate overall (% total labor force): 5.6 (2016), 6.0 (2017)\n  - Unemployment rate nationals (% total labor force): 12.3 (2016), 12.8 (2017)\n\nSource: Press Release No. 18/304 — IMF Executive Board Concludes 2018 Article IV Consultation with Saudi Arabia.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Saudi Arabia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/07/23/pr18304-imf-executive-board-concludes-2018-article-iv-consultation-with-saudi-arabia"
    }
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    "Published: July 24, 2018",
    "Real GDP growth is expected to increase to 1.9 percent in 2018.",
    "Non-oil growth is expected to strengthen to 2.3 percent in 2018.",
    "Growth is expected to pick-up further over the medium-term as the reforms take hold and oil output increases.",
    "Risks are balanced in the near-term.",
    "CPI inflation:",
    "Unemployment:",
    "Fiscal balance (central government):",
    "Financing:",
    "Public debt:",
    "Central government finances (selected):",
    "Directors’ fiscal guidance and recommendations:",
    "Authorities have introduced the value-added tax (VAT) and implemented higher gasoline and electricity prices at the beginning of 2018.",
    "Directors:",
    "Current account:",
    "SAMA net foreign assets are expected to increase this year and over the medium-term.",
    "Reserves (months imports): 32.3 (2016), 28.4 (2017), 29.2 (2018), 30.2 (2019).",
    "External debt (% GDP): 28.9 (2016), 34.9 (2017), 35.7 (2018), 36.5 (2019).",
    "Directors agreed that the exchange rate peg to the U.S. dollar continues to serve Saudi Arabia well given the structure of the Saudi economy.",
    "Credit and deposit growth remain weak but are expected to strengthen due to higher government spending and non-oil growth.",
    "Money and credit:",
    "Bank sector outlook:",
    "Directors’ financial sector recommendations:",
    "Ongoing reforms include improving the business environment, developing a more vibrant SME sector, deepening capital markets, increasing involvement of women in the economy, and developing new industries with high potential for growth and job creation.",
    "Directors’ structural reform guidance:",
    "Population: 32.6 million (2017)",
    "Quota: SDR 6,985.5 million (2.93% of total)",
    "Literacy: 95% (2015, adults)",
    "Main products and exports: Oil and oil products (77%)",
    "Key export markets: Asia, U.S., and Europe",
    "Table (selected series):",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Saudi Arabia and the IMF](http://www.imf.org/external/country/SAU/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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