{ "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Saudi Arabia", "publication": "IMF News, September 6, 2023", "sourceUrl": "https://www.imf.org/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult", "canonical": "https://www.imf.org/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult", "overlayPath": "/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/index.md", "summary": "On July 20, 2023, the Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with Saudi Arabia.", "publishDate": "2023-09-06", "sections": [ { "heading": "Economic performance and growth", "content": "- Saudi Arabia was the fastest growing G20 economy in 2022.\n- Overall growth reached 8.7 percent in 2022.\n- Non-oil GDP growth in 2022 was 4.8 percent, driven by robust private consumption and non-oil private investment, including giga projects.\n- Main drivers of non-oil growth: wholesale, retail trade, construction, and transport.\n- The output gap is estimated to have closed during 2022, with non-oil growth momentum continuing in 2023.\n- Real GDP growth projections:\n - 2021: 3.9\n - 2022: 8.7\n - 2023: 1.9 (Proj.)\n - 2024: 2.8 (Proj.)\n- Non-oil real GDP growth:\n - 2021: 5.7\n - 2022: 4.8\n - 2023: 4.9 (Proj.)\n - 2024: 4.4 (Proj.)" }, { "heading": "Labor market and participation", "content": "- Total unemployment dropped to 4.8 percent by end-2022—from 9 percent during Covid.\n- Increase in labor force participation accompanied the decline in unemployment.\n- Composition: increase in Saudi workers in the private sector and expatriate workers (mostly in the construction and agricultural sectors) rising back above pre-Covid levels.\n- Youth unemployment: halved to 16.8 percent in 2022 over the past two years.\n- Female participation in the labor force reached 36 percent in 2022, exceeding the 30 percent target set under Vision 2030." }, { "heading": "Prices and inflation", "content": "- Average CPI grew by 2.5 percent y-o-y in 2022, in part contained by domestic subsidies/price cap and a strong US dollar.\n- Headline inflation: uptick to 3.4 percent y-o-y in early 2023; back at 2.8 percent y-o-y in May 2023.\n- CPI Inflation (avg, %) table:\n - 2021: 3.1\n - 2022: 2.5\n - 2023: 2.3 (Proj.)" }, { "heading": "Banking sector and financial conditions", "content": "- Banking system remains on a strong footing.\n- Aggregate capital adequacy ratio is strong.\n- Profitability—driven by net interest margins—is high and above pre-pandemic levels.\n- NPL ratio is low and declining.\n- Mortgage growth has recently moderated.\n- Demand for project-related and consumer loans remains strong.\n- Rising funding costs linked to higher interest rates and a greater share of time and saving deposits in banks’ liabilities have impacted profitability, offset by loan demand." }, { "heading": "Fiscal position and public finances", "content": "- Favorable oil market dynamics strengthened the fiscal position, with a 2.5 percent of GDP surplus—the first since 2013.\n- The surplus would have been higher if not for additional spending that was not initially budgeted for, mostly reflecting increases in goods and services and capital spending.\n- About 2½ percent of GDP of additional expenditures were estimated to be one-off non-recurrent spending (about half in goods and services).\n- Public debt at 23 percent of GDP is characterized as low and sustainable, with ample fiscal space available to address potential headwinds.\n- Central government finances (percent of GDP):\n - Revenue:\n - 2021: 29.6\n - 2022: 30.7\n - 2023: 28.4 (Proj.)\n - Expenditure:\n - 2021: 31.9\n - 2022: 28.2\n - 2023: 29.7 (Proj.)\n - 2024: 30.0 (Proj.)\n - Fiscal balance:\n - 2021: -2.3\n - 2022: -1.2\n - 2023: -1.6 (Proj.)\n - Public debt:\n - 2021: 28.8\n - 2022: 23.8\n - 2023: 25.1 (Proj.)\n - 2024: 25.8 (Proj.)\n - Non-exported oil primary balance (% Non-oil GDP):\n - 2021: -27.2\n - 2022: -29.6\n - 2023: -23.7 (Proj.)\n - 2024: -21.4 (Proj.)" }, { "heading": "External position and reserves", "content": "- Higher oil prices and stepped-up oil production improved the current account to a 10-year high surplus in 2022.\n- Current account (% GDP):\n - 2021: 5.1\n - 2022: 13.6\n - 2023: 6.5 (Proj.)\n - 2024: 3.5 (Proj.)\n- The 13.6 percent of GDP surplus in 2022 did not lead to a corresponding increase in official reserves due to large accumulation of assets abroad; official reserves remain at comfortable levels (almost 20-month import cover).\n- Reserves (months imports):\n - 2021: 20.3\n - 2022: 19.4\n - 2023: 17.5 (Proj.)\n - 2024: 15.7 (Proj.)\n- FDI (% GDP):\n - 2021: 2.2\n - 2022: 0.7\n - 2023: 0.8 (Proj.)\n- External debt (% GDP):\n - 2021: 31.7\n - 2022: 23.9\n - 2023: 24.9 (Proj.)\n - 2024: 26.1 (Proj.)\n- REER (% change):\n - 2021: 4.2\n - 2022: 2.1\n - 2023: … (For 2023, data is latest available.)" }, { "heading": "Risks to the outlook", "content": "- Upside risks:\n - Higher oil prices—as expectations of strong oil demand for the rest of the year persist.\n - Possible change in OPEC+ oil production cuts.\n - Accelerated structural reforms and investment could spur growth.\n- Downside risks:\n - Too rapid a rise in non-oil investment could further raise domestic demand, adding pressure on prices and external accounts.\n - Lower oil prices due to subdued global activity represent a key short-term risk.\n - A quicker shift in demand for fossil fuel could hamper growth in the medium to long term." }, { "heading": "Executive Board assessment and policy recommendations", "content": "- Directors agreed with the thrust of the staff appraisal and welcomed Saudi Arabia’s ongoing economic transformation supported by Vision 2030 reforms and higher oil prices.\n- Observed outcomes: high growth, record low unemployment, contained inflation, and strong external and fiscal buffers while reducing reliance on oil.\n- Contingency measures, such as tighter fiscal policy, should be considered if demand pressures materialize.\n- Fiscal policy and revenue mobilization:\n - Welcomed impressive non-oil revenue mobilization efforts that have doubled non-oil revenues since 2017.\n - Called for additional fiscal adjustment over the medium term to maintain stronger buffers and meet intergenerational needs while mitigating risks from oil price volatility.\n - Recommended additional non-oil revenue efforts, including by maintaining the VAT rate.\n- Subsidy and energy pricing:\n - Most Directors recommended faster increases in energy prices to reduce subsidies.\n - A few Directors called for continuing the gradual implementation articulated in the Vision 2030 road map.\n - Energy subsidy reforms should be accompanied by scaling up well-targeted social programs to limit the impact on the most vulnerable.\n- Fiscal transparency and frameworks:\n - Emphasized ongoing rollout of the Medium-Term Fiscal Framework and enhanced disclosure to support implementation of a fiscal rule and delink spending decisions from oil price fluctuations.\n - Welcomed ongoing work on a Sovereign Asset Liability Management Framework and called for its quick completion.\n- Monetary and exchange rate policy:\n - Agreed that the exchange rate peg continues to serve the country well.\n - Noted monetary policy framework should continue to use market-based instruments to align the interbank rate with the policy rate, which should continue to move in line with the Fed’s policy rate.\n- Financial sector vigilance:\n - Welcomed efforts to modernize regulatory and supervisory frameworks.\n - Recommended maintaining vigilance and considering a gradual tightening in macroprudential guidelines/regulations and phasing out of fiscal incentives if credit growth remains persistently elevated.\n- Structural reforms and investment policy:\n - Welcomed progress on structural reforms, including marked improvement in female labor force participation and improvements in regulatory and business environment.\n - Encouraged careful calibration of investment programs to ensure catalytic effects and avoid private sector crowding out.\n - Agreed industrial policy should support structural reform efforts while minimizing associated risks.\n - Welcomed progress to strengthen governance and called for accelerating ongoing actions.\n- Climate and Green Initiative:\n - Welcomed Saudi Arabia’s Green Initiative; implementation essential to meet net emissions reduction target with minimal losses.\n - Staff assessment: even in a transition scenario where all countries implement their National Determined Contributions (NDC), the impact on the Saudi economy is expected to be limited.\n - Directors looked forward to elaboration of specific programs and investments related to each goal.\n- Data and international engagement:\n - Commended enhancements in economic data and encouraged continuation.\n - Directors looked forward to Saudi Arabia's continued leadership in addressing global challenges." }, { "heading": "Selected background indicators", "content": "- Population: 32.2 million (2022)\n- Quota: SDR 9,992.6 million (2.10% of total)\n- Main products and exports: Oil and oil products (79.5%)\n- Key export markets: Asia, U.S., and Europe\n- Unemployment rate:\n - Overall (% total labor force): 6.6 (2021), 5.6 (2022)\n - Nationals (% total labor force): 11.3 (2021), 9.4 (2022)\n\nIMF Press Release No. 23/302 — Executive Board conclusion of the 2023 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- https://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/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult" } ], "bullets": [ "[Markdown version](/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/index.md)", "[Structured JSON version](/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/index.json)", "[Bundle manifest](/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/bundle-manifest.json)", "Published: September 6, 2023", "Saudi Arabia was the fastest growing G20 economy in 2022.", "Overall growth reached 8.7 percent in 2022.", "Non-oil GDP growth in 2022 was 4.8 percent, driven by robust private consumption and non-oil private investment, including giga projects.", "Main drivers of non-oil growth: wholesale, retail trade, construction, and transport.", "The output gap is estimated to have closed during 2022, with non-oil growth momentum continuing in 2023.", "Real GDP growth projections:", "Non-oil real GDP growth:", "Total unemployment dropped to 4.8 percent by end-2022—from 9 percent during Covid.", "Increase in labor force participation accompanied the decline in unemployment.", "Composition: increase in Saudi workers in the private sector and expatriate workers (mostly in the construction and agricultural sectors) rising back above pre-Covid levels.", "Youth unemployment: halved to 16.8 percent in 2022 over the past two years.", "Female participation in the labor force reached 36 percent in 2022, exceeding the 30 percent target set under Vision 2030.", "Average CPI grew by 2.5 percent y-o-y in 2022, in part contained by domestic subsidies/price cap and a strong US dollar.", "Headline inflation: uptick to 3.4 percent y-o-y in early 2023; back at 2.8 percent y-o-y in May 2023.", "CPI Inflation (avg, %) table:", "Banking system remains on a strong footing.", "Aggregate capital adequacy ratio is strong.", "Profitability—driven by net interest margins—is high and above pre-pandemic levels.", "NPL ratio is low and declining.", "Mortgage growth has recently moderated.", "Demand for project-related and consumer loans remains strong.", "Rising funding costs linked to higher interest rates and a greater share of time and saving deposits in banks’ liabilities have impacted profitability, offset by loan demand.", "Favorable oil market dynamics strengthened the fiscal position, with a 2.5 percent of GDP surplus—the first since 2013.", "The surplus would have been higher if not for additional spending that was not initially budgeted for, mostly reflecting increases in goods and services and capital spending.", "About 2½ percent of GDP of additional expenditures were estimated to be one-off non-recurrent spending (about half in goods and services).", "Public debt at 23 percent of GDP is characterized as low and sustainable, with ample fiscal space available to address potential headwinds.", "Central government finances (percent of GDP):", "Higher oil prices and stepped-up oil production improved the current account to a 10-year high surplus in 2022.", "Current account (% GDP):", "The 13.6 percent of GDP surplus in 2022 did not lead to a corresponding increase in official reserves due to large accumulation of assets abroad; official reserves remain at comfortable levels (almost 20-month import cover).", "Reserves (months imports):", "FDI (% GDP):", "External debt (% GDP):", "REER (% change):", "Upside risks:", "Downside risks:", "Directors agreed with the thrust of the staff appraisal and welcomed Saudi Arabia’s ongoing economic transformation supported by Vision 2030 reforms and higher oil prices.", "Observed outcomes: high growth, record low unemployment, contained inflation, and strong external and fiscal buffers while reducing reliance on oil.", "Contingency measures, such as tighter fiscal policy, should be considered if demand pressures materialize.", "Fiscal policy and revenue mobilization:", "Subsidy and energy pricing:", "Fiscal transparency and frameworks:", "Monetary and exchange rate policy:", "Financial sector vigilance:", "Structural reforms and investment policy:", "Climate and Green Initiative:", "Data and international engagement:", "Population: 32.2 million (2022)", "Quota: SDR 9,992.6 million (2.10% of total)", "Main products and exports: Oil and oil products (79.5%)", "Key export markets: Asia, U.S., and Europe", "Unemployment rate:", "[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/)", "[https://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/index.md", "json": "/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/index.json", "bundleManifest": "/en/news/articles/2023/09/05/pr23302-saudi-arabia-imf-exec-board-concludes-2023-art-iv-consult/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T02:19:46.607Z" }