IMF commends Saudi Arabia’s strong economic performance

Usually, every year, the International Monetary Fund holds bilateral discussions with its 91 members as part of Article IV of the IMF’s agreement.

In relation to the 2023 Article IV consultation with Saudi Arabia, the IMF has released several documents summarizing the views of the IMF executive board. These views are based on the findings of the IMF’s staff report, which concluded the Article IV consultation with Saudi Arabia.

The staff report, prepared by a team of IMF staff, was presented to the executive board on July 20. The report is based on discussions — which concluded on May 28 — held with Saudi officials regarding economic developments and policies.

The IMF executive directors have welcomed Saudi Arabia’s economic transformation, which is supported by commendable reforms under the Saudi Vision 2030 agenda and higher oil prices. These efforts have led to high growth, record low unemployment, controlled inflation, and robust external and fiscal buffers, while also reducing dependence on oil.

Also, they expressed their appreciation for the impressive efforts made in mobilizing non-oil revenue, which has already doubled since 2017.

The directors commended the performance of the Saudi banking sector, affirming its strong position. They also expressed appreciation for the Saudi efforts to modernize regulatory and supervisory frameworks, and recommended maintaining the exchange rate peg as it continues to benefit the country.

They highlighted the importance of using market-based instruments in the monetary policy framework to align the interbank rate with the policy rate. They recommended that the policy rate should continue to move in line with the Federal Reserve’s policy rate.

The IMF executive directors acknowledged the substantial progress made in the Saudi economy through the implementation of structural reforms. They also expressed appreciation for the notable improvement in female labor force participation.

The IMF executive directors acknowledged the substantial progress made in the Saudi economy through the implementation of structural reforms. They also expressed appreciation for the notable improvement in female labor force participation.

Female participation in the labor force exceeded expectations, reaching 36 percent in 2022. This surpasses the initial target of 30 percent set by the Saudi Vision 2030 reform agenda.

The directors praised the advancements made in the regulatory and business environment, which have resulted in increased private sector investment. They encouraged further building upon this positive progress.

They expressed their support for Saudi Arabia’s Green Initiative and emphasized its crucial role in achieving the net emissions reduction target with minimal economic losses.

It is worth noting that the staff report for the 2023 Article IV consultation has been approved by IMF executive directors. The report commended the Kingdom for its implementation of the Saudi Vision 2030 reforms, which have played a crucial role in advancing the country’s economic diversification agenda and reducing its reliance on oil.

The staff report also highlighted the implementation of the National Investment Strategy, along with continued structural reforms, which are expected to foster competitiveness and enhance total factor productivity. These measures are projected to significantly boost non-oil growth in the country.

The IMF staff believe that structural reforms will be necessary to further reduce unemployment, diversify the economy and respond to the changing dynamics of the global energy mix.

I believe that the IMF has fairly praised the Kingdom’s economic performance and reforms based on the economic facts mentioned in the IMF’s staff report for the 2023 Article IV consultation.

Among these facts, Saudi Arabia was the fastest-growing G20 economy with an overall growth rate of 8.7 percent in 2022. Additionally, it achieved a historical low unemployment rate of 4.8 percent in 2022, compared to 9 percent during the COVID-19 pandemic.

• Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz