{ "title": "Saudi Arabia: Staff Concluding Statement of the 2022 Article IV Mission", "publication": "IMF News, June 22, 2022", "sourceUrl": "https://www.imf.org/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission", "overlayPath": "/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "summary": "Saudi Arabia: Staff Concluding Statement of the 2022 Article IV Mission", "publishDate": "2022-06-22", "sections": [ { "heading": "Executive summary", "content": "- IMF mission led by Mr. Amine Mati conducted discussions for the 2022 Article IV Consultation from May 23‒June 6.\n- Saudi Arabia managed the COVID-19 pandemic well, is well-positioned to weather risks from the war in Ukraine and global monetary policy tightening, and is experiencing a strong recovery supported by higher oil prices and Vision 2030 reforms.\n- Key near-term projection highlights: GDP growth of 7.6 percent in 2022; current account surplus of 17.4 percent of GDP in 2022; headline inflation averaging 2.8 percent in 2022." }, { "heading": "Recent performance (2021 and early 2022)", "content": "- Overall growth: 3.2 percent in 2021.\n- Sector drivers: recovering non-oil manufacturing, retail (including e-commerce), and trade.\n- Unemployment: 11 percent in 2021, a 1.6 percentage drop from 2020, mainly due to higher employment for Saudi nationals, particularly women, in the private sector.\n- Inflation:\n - Average inflation in 2021: 3.1 percent.\n - CPI inflation in April 2022: 2.3 percent (y/y).\n - Noted pressures: higher food and gasoline prices; double-digit wholesale price inflation; rising commodity and shipping/logistics costs.\n- External position and reserves:\n - Current account: surplus of 5.3 percent of GDP in 2021, up from a deficit of 3.2 percent of GDP in 2020.\n - Net foreign assets declined but remain at very comfortable levels." }, { "heading": "Economic prospects and risks", "content": "- Near- and medium-term outlook: positive with balanced risks.\n- Forecasts and projections:\n - Overall GDP: 7.6 percent in 2022.\n - Non-oil growth: 4.2 percent in 2022.\n - Headline inflation: 2.8 percent on average in 2022.\n - Current account surplus: 17.4 percent of GDP in 2022.\n - Reserve buffers: expected to stabilize at about 28 months of imports over the medium term.\n- Risk factors:\n - Upside: successful implementation of the National Investment Strategy (NIS) and labor market reforms; further increases in oil production.\n - Downside: pressures to spend oil windfalls and deviate from the reform agenda; inflationary pressures from higher food prices; another COVID surge; lower oil prices from weaker global activity if the war in Ukraine has lasting effects; an abrupt slowdown in China.\n- Direct spillovers from the war in Ukraine are negligible; elevated oil prices strengthen fiscal and external buffers. Limited trade and financial links with Russia and Ukraine and negligible exposure through the sovereign wealth fund limit impact." }, { "heading": "Fiscal policy: managing windfall gains and consolidation", "content": "- 2022 fiscal performance:\n - IMF staff projects a fiscal surplus of 5.6 percent of GDP in 2022 (relative to 2.5 percent budgeted).\n - Central government debt-to-GDP ratio projected to decline to 24.2 percent.\n - Central government net financial asset-to-GDP ratio projected to improve to –8.7 percent, from –17.7 percent in 2021.\n- Recommended fiscal priorities:\n - Manage higher oil revenue gains sustainably while continuing fiscal consolidation and avoiding procyclicality.\n - Continue implementing Vision 2030 reforms and the NIS to diversify the economy.\n - Rely on expenditure cuts for non-oil related adjustment, including phasing out pandemic-related measures, compressed capital expenditures for projects already implemented, efficiency gains from full utilization of the ETIMAD online platform, and rationalizing the wage bill.\n- Medium-term consolidation and structural fiscal reforms:\n - Non-oil revenue mobilization: non-oil revenues doubled to 12.8 percent of GDP over the past four years; continue efforts including maintaining the tripled VAT rate and broadening revenue bases.\n - Energy price reforms: subsidies halved between 2010 and 2020; scope exists to lift the cap on gasoline prices and consider larger-than-planned step increases for other fuel products, with part of savings used to scale up targeted social programs (Daman program and Citizens’ Account) and pursue social security reform toward a unified social registry and needs-based safety net.\n - Expenditure rule: mission recommends setting an expenditure rule based on a long-term fiscal anchor to delink spending from oil price fluctuations and support the Fiscal Sustainability Program.\n - Public sector coverage and asset-liability management: incorporate and monitor activities of PIF, NDF, and other public investment entities; accelerate work on a sovereign asset-liability management framework.\n - Public financial management: continue establishing a medium-term fiscal framework, move toward performance-based budgeting, prepare for a treasury single account, enhance budget disclosure, and carefully monitor guarantees and contingent liabilities (especially with expected PPP growth).\n- Debt management:\n - Public debt remains sustainable; Kingdom plans to refinance existing debt rather than use higher oil revenue to repay debt.\n - Strategy supported: lengthen debt maturities, reduce refinancing costs, build yield curve in domestic and international markets.\n - Plans for issuing a green bond in 2022 are welcomed." }, { "heading": "Monetary and financial sector policy", "content": "- Impact of global monetary tightening: expected to be limited given high oil prices and the structure of the banking system.\n- Banking system characteristics and resilience:\n - Low wholesale funding and high level of non-interest-bearing deposits.\n - Additional interest rate hikes aligned with US tightening likely to have a positive effect on banks’ profitability.\n - Staff’s preliminary analysis: negligible impact on credit growth and non-oil GDP; positive for banking sector profitability when oil prices and liquidity are high.\n - Financial stability: banks are profitable, liquid, and well-capitalized; NPLs remain low despite the end of the deferred loan program for SMEs.\n - Macroprudential measures (loan-to-value ratio, debt service-to-income ratio, explicit links to salaries) help limit risks from rapid rise in residential mortgages.\n - Continued implementation needed: new regulatory and legal framework for Islamic banks, new resolution framework, and steps toward Basel IV.\n- Exchange rate policy:\n - The currency peg to the U.S. dollar remains appropriate given the structure of the economy and continues to support monetary stability.\n - Saudi Arabia’s external position is broadly in line with medium-term fundamentals with adequate buffers to maintain the peg." }, { "heading": "Structural reforms and climate policy", "content": "- Vision 2030 implementation: essential for diversification and boosting growth; supported by Vision Realization Plans and 13 Vision Realization Programs (VRPs).\n- Achievements cited:\n - Attracting foreign investment through 300+ initiatives and streamlined regulations.\n - Increased home ownership.\n - Female labor participation: 35 percent, already surpassing the 30 percent target set for 2030.\n - Ease of doing business: one-stop shop to register a business in 3 minutes.\n - Enhanced digitalization of government operations (procurement, pay, social services).\n - Increased investment aligned with the National Investment Strategy.\n- Remaining structural challenges:\n - FDI remains low despite significant pickup in 2021; diversification into more sophisticated products is limited.\n - Boosting private sector investment requires rigorous cost-benefit analysis for public resource use (including PIF projects) to ensure high returns and greater private participation.\n - Labor market reforms needed: increase mobility of expatriate workers via visa reforms; strengthen education and training; close gender gaps; compress wage differentials.\n - Strengthen governance, SME development, and digitalization to enhance private sector development.\n- Climate and green transition:\n - Saudi Green Initiative (announced 2021) objectives:\n - Meet 50 percent of the Kingdom’s domestic energy needs from renewables by 2030 (up from 1 percent currently).\n - Increase vegetation cover by planting 10 billion trees to serve as a carbon sink.\n - Backed by a water strategy considering Riyadh’s vulnerabilities to climate change.\n - Ramp up investments in blue and green hydrogen and R&D focusing on the circular carbon economy.\n - Implementation needs: a detailed roadmap specifying investment magnitude and technological feasibility; consistency with energy price reforms and water price reforms to reduce emissions.\n\nSource: Saudi Arabia: Staff Concluding Statement of the 2022 Article IV Mission (June 22, 2022).\n\n---\n\n\n References\n\n- Saudi Arabia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json)", "Published: June 22, 2022", "IMF mission led by Mr. Amine Mati conducted discussions for the 2022 Article IV Consultation from May 23‒June 6.", "Saudi Arabia managed the COVID-19 pandemic well, is well-positioned to weather risks from the war in Ukraine and global monetary policy tightening, and is experiencing a strong recovery supported by higher oil prices and Vision 2030 reforms.", "Key near-term projection highlights: GDP growth of 7.6 percent in 2022; current account surplus of 17.4 percent of GDP in 2022; headline inflation averaging 2.8 percent in 2022.", "Overall growth: 3.2 percent in 2021.", "Sector drivers: recovering non-oil manufacturing, retail (including e-commerce), and trade.", "Unemployment: 11 percent in 2021, a 1.6 percentage drop from 2020, mainly due to higher employment for Saudi nationals, particularly women, in the private sector.", "Inflation:", "External position and reserves:", "Near- and medium-term outlook: positive with balanced risks.", "Forecasts and projections:", "Risk factors:", "Direct spillovers from the war in Ukraine are negligible; elevated oil prices strengthen fiscal and external buffers. Limited trade and financial links with Russia and Ukraine and negligible exposure through the sovereign wealth fund limit impact.", "2022 fiscal performance:", "Recommended fiscal priorities:", "Medium-term consolidation and structural fiscal reforms:", "Debt management:", "Impact of global monetary tightening: expected to be limited given high oil prices and the structure of the banking system.", "Banking system characteristics and resilience:", "Exchange rate policy:", "Vision 2030 implementation: essential for diversification and boosting growth; supported by Vision Realization Plans and 13 Vision Realization Programs (VRPs).", "Achievements cited:", "Remaining structural challenges:", "Climate and green transition:", "[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)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "json": "/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2022/06/17/saudi-arabia-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T01:20:06.672Z" }