The International Monetary Fund (IMF) issued a report regarding countries’ economic outlook. In this report, the IMF revised its estimation regarding Saudi Arabia’s economic growth downwardly. According to the latest estimate, the Saudi economy is expected to grow 2.1% in 2021.
Last month, the IMF estimated that Saudi economic growth would realize around 2.9% in the gross domestic product (GDP). The revision came due to expectations for the continuing economic repercussions of the pandemic and low prices in oil.
According to official figures, Saudi Arabia’s economy shrank 4.1% last year due to the same reasons.
Additionally, the IMF reported that non-oil GDP, a measure of the progress in Saudi reforms targeting to reduce the Saudi economy’s dependence on oil, is expected to grow 3.9% this year.
In terms of budget balance, the IMF estimates that Saudi Arabia’s fiscal deficit would realize around 4.2% of its GDP this year: a dramatic decrease contrary to last year’s number, 11.3%. In this sense, the report stated that “the VAT rate increase, the removal of cost-of-living allowances, the increased focus on the efficiency of capital spending, and planned further domestic energy price reforms are all important contributors to the planned fiscal adjustment and should not be reversed or delayed.”
On the other hand, the IMF warned that “a slower pace of adjustment could be considered this year to provide further support to recovery” while fiscal consolidation is needed.