IMF Witnessed Saudi Inflation at 2.8% As GDP Growth Reaches a Record High

IMF Witnessed Saudi Inflation at 2.8% As GDP Growth Reaches a Record High

Saudi Arabia is expected to become the quickest-growing economy worldwide this year as significant top player reforms, a steep increase in oil prices, and industrial power restoration from a disease outbreak recession in 2020. As per the current Article IV consultation study, the gross domestic item is expected to rise by 7.6%, the highest growth in nearly a decade. 

In spite of more significant costs for imported goods and services, inflation will continue to stay under control in 2022 at 2.8 percent as the central bank enforces strategy in connection with the US Federal Reserve. Elevated non-oil income and more significant proceeds from oil exports will significantly boost the public finances and the outer position. Reserve components will continue to stay sufficient.

Preserving control over government expenses despite rising oil revenues will be critical, but there is room for more focused welfare spending. Tax regulation and income administration advancements to elevate more taxes from non-oil actions would aid fiscal consolidation.

Handling oil revenues in a sensible manner so that expenses do not increase and decrease in lockstep with oil prices would encourage financial stability and inhibit a comeback to preceding oil-driven boom and bust cycles. Long-term budget preparation and economic diversification policies would be similarly beneficial.

Thanks to effective central bank regulation, the financial industry is robust and has minimal uncertainties. In a climate of increasing oil prices and abundant liquidity, interest rate hikes are projected to have a minimal influence on the Saudi economy. Continued improvements to the structure for finance industry regulation and ongoing monitoring of expanding mortgage loans are critical to avoiding dangers.

At a media briefing on Wednesday, Amine Mati, assistant director of the IMF, anticipated that Saudi Arabia would have a balanced budget of about 5.5 percent of its GDP, up from $21 billion during the second quarter.

Mati expanded, saying that proper use of the Kingdom's rising excess will be accomplished by ensuring that fiscal allocations are followed. He said that social expenditure should keep pace with the growth in excess, which would then be reinvested into the economy.

"Incorporating a fiscal norm would assist in maintaining a fiscal anchor over the medium term, and an interconnected asset liability control model will assist the government in assessing Saudi Arabia's fiscal posture and situation," Mati added.

Mati said raising the real worth tax from 5% to 15% amid the COVID-19 epidemic was critical in encouraging non-oil income development. Tax administration policies also maintain and expedite tax collections.

As per the report, the Public Investment Fund's main aim is to get high-yield projects with private involvement, as it seeks to construct giga-projects. 

According to the research, Saudi Arabia is taking significant strides to enhance the economic ecosystem, which will lure international investment.

It went on to say that the percentage of Saudi women working has more than quadrupled in the last four years, reaching 33% in the first quarter of 2022, above the 30% objective set by the Vision 2030 plan.

According to the research, Saudi Arabia's economic prognosis is optimistic, and the Kingdom's long-term success is heavily dependent on maintaining the reform pace.

Nakla News Team
Nakla News Team

Nakla News Team is a group of news editors who finds the latest happenings in the Fintech industry and present it to the Nakla audience.