Saudi Arabia’s “bold reform program” is paying off, with economic growth in its non-oil sector forecast to pick up this year, the International Monetary Fund (IMF) said Friday.
Growth in non-oil parts of the economy is projected at 1.7 percent in 2017 compared to 0.2 percent last year, the fund said, amid the Kingdom’s efforts to diversify the economy in the wake of the crash in oil prices.
“Saudi Arabia has embarked on a bold reform program under Vision 2030 that was announced in 2016,” the IMF said following a consultation on the Kingdom’s economy.
The fund “welcomed the direction of the authorities’ fiscal reforms” in Saudi Arabia, adding that the fiscal deficit is set to narrow to under 1 percent of gross domestic product (GDP) by 2022, from 17.2 percent in 2016.
“The authorities have made considerable progress in initiating the implementation of their ambitious reform agenda,” the IMF said.
“Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place.”
Overall GDP growth is however expected to slow this year, partly due to lower revenues given the Kingdom’s commitment to oil-output cuts deal agreed by members and non-members of the Organization of the Petroleum Exporting Countries (OPEC).
Real GDP growth is expected at close to zero this year, compared to 1.7 percent in 2016, while the unemployment rate among Saudi nationals increased to 12.3 percent.
“Growth is expected to strengthen over the medium-term as structural reforms are implemented. Risks mainly come from uncertainties about future oil prices, as well as questions about how the ongoing reforms will affect the economy,” the IMF said.