IMF Executive Board Concludes the 2012 Article IV Consultation with Saudi Arabia

Public Information Notice (PIN) No. 12/97
August 7, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On July 2, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Saudi Arabia.1


Saudi Arabia provided important support to the global economy in 2011 by raising oil production to help stabilize global oil markets. The commitment to provide $15 billion in additional resources for the IMF has also contributed to global stability. Adverse spillovers from unrest in the region and the euro area crisis have been limited so far. Higher oil revenues have been used to accelerate domestic developmental objectives as well as to support other economies in the region and beyond.

The pace of economic expansion accelerated in 2011. Overall real GDP growth reached 7.1 percent, and the non-oil economy grew by 8 percent—the highest since 1981. Despite increased economic activity, inflation stabilized at 5 percent as food inflation subsided and imports of capital goods and labor helped prevent bottlenecks from emerging.

New initiatives to address pressing social issues such as unemployment, availability of affordable housing, and SME financing, translated into an increase in real government spending of 20 percent. Nevertheless, despite increased spending and strong import growth, fiscal and external surpluses strengthened further in 2011 as oil revenues rose. Monetary aggregates grew strongly in 2011 and credit growth reached double digits as the economic expansion translated into increased demand for credit. Consistent with the peg to the U.S. dollar, monetary policy remained accommodative and policy rates remained unchanged. The banking system remained highly capitalized and liquid with improved profitability.

Executive Board Assessment

Executive Directors welcomed the authorities’ efforts to stabilize oil markets and noted the positive spillover to the region from Saudi Arabia’s higher growth, public spending, and expanded financial assistance. Higher oil revenues have strengthened fiscal and external balances and have boosted social spending and savings for future generations. The near-term economic outlook is broadly favorable, although geopolitical risks and oil prices remain sources of volatility.

Directors stressed the need to forestall any inflation pressures engendered by robust growth through a proactive use of liquidity and macroprudential policy tools. They also noted that, while the government has built significant policy buffers, fiscal spending is above the level consistent with an intergenerationally equitable drawdown of oil wealth. Accordingly, they highlighted the importance of preserving flexibility in entitlements, ensuring efficiency in spending, and broadening the tax base.

Directors welcomed the authorities’ efforts to strengthen budget institutions and further delink fiscal spending from oil price developments. They encouraged the authorities to continue to improve the budgetary process, including by carefully screening supplementary budgetary expenditures, establishing a macro-fiscal unit, and anchoring spending decisions in a multi-year framework.

Directors noted the recent initiatives to increase employment of Saudi nationals in the private sector and the complementary supply-side efforts to boost their skills. Adjusting domestic energy prices would enhance the efficiency of resource use and could also have beneficial employment effects, while facilitating economic diversification.

Directors agreed that the fixed exchange rate continues to serve Saudi Arabia well. Since the peg limits the scope for monetary policy conduct, the use of macroprudential and liquidity management tools remains key to effective policymaking.

Directors commended the authorities’ efforts to strengthen financial supervision and risk management, as well as their progress toward adopting Basel III standards. They encouraged continued implementation of the FSAP Update recommendations and welcomed improvements in the AML/CFT regime. Directors also welcomed progress made in strengthening the statistical system, but called for further measures to improve data quality, availability, and timeliness.

Saudi Arabia: Selected Economic Indicators
        Prel. Proj.


2009 2010 2011 2012
  (Percentage change)

Production and prices


Real GDP

4.2 0.1 5.1 7.1 6.0

Real oil GDP

4.2 -7.8 2.4 4.6 4.5

Real non-oil GDP

4.3 3.5 6.2 8.0 6.5

Nominal GDP (US$ billions)

477 377 457 598 675

Consumer price index

9.9 5.1 5.4 5.0 5.2
  (Percent of GDP)

Fiscal and financial variables


Central government revenue

61.6 36.1 43.4 49.9 50.6

Of which: oil revenue

55.1 30.8 39.2 46.2 46.0

Central government expenditure

29.9 43.4 38.2 36.9 34.1

Fiscal balance (deficit -)

31.7 -7.4 5.1 13.0 16.5

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

-59.6 -69.9 -68.2 -77.4 -70.1

Change in broad money (percent)

17.6 10.7 5.0 13.3 12.2
  (US$ billions)

External sector



313.9 192.6 251.5 365.0 411.3

Of which: oil and refined products

281.4 163.3 215.5 317.9 361.0


-101.6 -87.2 -97.6 -120.2 -134.8

Current account

132.5 21.0 66.8 158.5 179.2

Current account (percent of GDP)

27.8 5.6 14.6 26.5 26.5

SAMA’s net foreign assets

438.5 405.9 441.0 535.9 701.8

SAMA's net foreign assets (in months of imports of goods and services)

31.9 27.5 26.2 29.2 36.2

Real effective exchange rate (percent change)

1.1 7.7 1.4 -2.4

Sources: Data provided by the authorities; and IMF staff estimates and projections.

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. 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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