On 19 May 2016 the IMF issued a report following the completion of consultations with Saudi Arabia under Article IV of the IMF’s articles of agreement.
The real GDP growth rate in Saudi Arabia is projected at 1.2% in 2016, a decrease from the 3.5% growth in 2015. The lower oil revenues have resulted in current account and fiscal deficits but the government’s financial assets are still high.
Saudi Arabia’s Vision 2030 aims to transform the economy to diversify growth, reduce dependence on revenues from oil, increase the role of the private sector and create employment for Saudi nationals. Policies to achieve these goals are expected to be announced later this year. The IMF considers that the reforms must be properly prioritized and introduced in the correct sequence. The pace of implementation of the reforms must be carefully assessed.
The IMF comments that privatization and public private partnerships (PPPs) would strengthen the business environment, attract foreign investment and support the development of capital markets. The reforms must include measures to increase the attractiveness of private sector jobs and entrepreneurship for Saudi nationals. They must also ensure that Saudi nationals have suitable skills for private employers.
The IMF considers that a balanced budget should be achieved in the medium term. Fiscal consolidation should include further increases in non-oil revenues in addition to control of spending. Tax measures are important, including the planned introduction of a value added tax (VAT).
