2024-09-04 19:38:17
The International Monetary Fund (IMF) has released a positive report on the Kingdom of Saudi Arabia following the completion of Article 4 consultations with the country. The International Monetary Fund report confirms that financial and regulatory reforms in Saudi Arabia have helped the Saudi economy accelerate growth, curb inflation and reduce unemployment to the lowest ever. The International Monetary Fund commends Saudi Arabia for its ongoing economic transformation and economic diversification efforts under Vision 2030.
The IMF’s Article IV consultation report praised Saudi Arabia for implementing macroeconomic policies and transformation measures that have led to greater growth in non-oil activities. The report also pointed out that Saudi Arabia’s reforms have led to an increase in employment, which has now exceeded the pre-Cold War figure. The female labor force participation rate has risen to more than 35%, achieving the 30% goal of exceeding Saudi Arabia’s 2030 Vision.
The IMF welcomes the actions taken by Saudi Arabia to implement a long-term financing plan to support the implementation of Vision 2030 initiatives, programs and projects while mitigating the risk of economic overheating. The report also emphasizes that Saudi Arabia has ample fiscal space and low public debt risks. Saudi Arabia’s vast financial reserves limit the impact of global and regional challenges.
The IMF report highlights ongoing reforms in the Kingdom, including ensuring effective implementation of regulations, streamlining fees, improving human capital, increasing participation of Saudi women in the labor market, promoting access to land and finance, and improving governance. , helping to foster private sector growth and attracting greater foreign direct investment, in addition to significant advances in digital transformation and artificial intelligence that support these efforts.
The IMF’s executive director praised Saudi Arabia for its leadership in multilateral forums, including as chairman of the IMF’s International Monetary and Financial Committee (IMFC), to help address global challenges.
The report also pointed out that the increase in service industry activities such as transportation, trade, tourism and finance was the reason for the 5.7% growth in consumption.
The International Monetary Fund said applications for foreign investment licenses reached a record level in 2023, roughly doubling compared with 2022, including 330 companies applying for licenses to set up regional headquarters in Saudi Arabia.
The report provides an overview of developments in Saudi Arabia’s banking sector, highlighting its high solvency and liquidity as well as its flexibility to respond to shocks. The International Monetary Fund noted that the banking sector is fundamentally sound, citing the efficiency of banking intermediaries through indicators of profitability, infrastructure and competitiveness.
The IMF report also noted that the Saudi Arabian Stock Exchange Index (Tadawul) will rise by 14.2% in 2023, outperforming the Morgan Stanley Emerging Markets Index by 7%, as well as improvements in the technological environment that supports investment and approvals Three digital banks. The IMF highlighted their contribution to improving financial inclusion and competitiveness because of the flexibility and innovation characteristic of these banks.
The International Monetary Fund noted that Saudi Arabia has contained risks arising from the rapid growth of real estate credit through a combination of government support, bank strength, full-recourse mortgage loans and other support measures. Improvements in the automation of the national money laundering and terrorism financing risk assessment matrix were also highlighted, as well as improving the accuracy of data analysis related to risks reported by reporting agencies, including fintech companies.
The IMF report notes that the increase in non-oil revenue reflects the effectiveness of existing reforms that have directly contributed to improved compliance, and praises the integration of customs procedures with international best practices.
The International Monetary Fund expects the non-oil sector (including government activities) to grow by 3.5% in 2024, supported by strong domestic demand. The International Monetary Fund also said that the Kingdom’s inflation rate is likely to stabilize at around 2% in the medium term, supported by the Saudi riyal’s peg to the U.S. dollar and local policies consistent with Saudi Arabia’s Vision 2030.
The International Monetary Fund confirmed that the country has one of the lowest carbon intensity of all major producers, reflecting its ongoing environmental reforms and efforts to achieve net-zero emissions by 2060. The report pointed out that Saudi Arabia successfully signed a 30-year purchase agreement for the NEOM green hydrogen project to realize its efforts to utilize renewable energy.
In order to capture approximately 44 million tons of carbon dioxide per year by 2035, the Saudi Arabian government intends to build one of the world’s largest carbon dioxide capture and storage facilities, which will become operational in 2027, according to the Saudi Arabian government. The capture capacity is 9 million tons. The International Monetary Fund noted that Saudi Arabia currently sequesters 1.3 million tons of carbon per year through its SABIC plant and Uthmaniyah gas plant sectors.
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