Saudi Arabia economy edging closer to reducing dependence on oil: Report

Riyadh, the financial center of Saudi Arabia. [Photo: Wikimedia]

In spite of an anticipated steep slowdown in overall growth this year, government-led reforms and the expansion of private investment in new sectors will boost Saudi Arabia’s non-oil economic growth, according to a Reuters report quoting a senior International Monetary Fund (IMF) official.

Due to strong oil prices that increased revenue and resulted in the kingdom’s first budget surplus in over ten years, the Saudi economy expanded by 8.7% last year.

According to the IMF’s prediction for Middle Eastern oil exporters, Saudi Arabia’s Gross Domestic Product (GDP) growth will be more than half to 3.1 percent this year. However, the forecast exceeds the 2.6 percent growth rate that the IMF predicted in January.

Several Organisation of the Petroleum Exporting Countries Plus (Opec+) members, led by Saudi Arabia, the top crude exporter in the world, recently announced unexpected reductions in oil production beginning in May. While this initially raised global oil prices, it is now being offset by worries about the state of the world economy and an uncertain demand outlook.

Quoting Jihad Azour, the director for the Middle East and Central Asia at the IMF, Reuters reported, “This year, with the implementation of the new Opec+ quotas, we expect the oil sector to slow down.     The impact on the kingdom’s budget depended on prices.”

“The drop in production will affect growth because output will decline, but revenues could grow and this could have a positive impact on both external accounts, the reserves, and the budget deficit,” the news agency quoted him further saying.

“Clearly, the strategy over the last five to six years has helped the Saudi economy, and also the public finances, to be less dependent on the cycle of oil.”

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