IMF sees 2017 Saudi growth ‘close to zero’ on oil prices, cuts

Muscat Daily - - BUSINESS -

Beirut, Le­banon - Saudi Ara­bia’s econ­omy will stall this year with growth “close to zero” due to lower oil rev­enue, the In­ter­na­tional Mon­e­tary Fund (IMF) said.

The fund low­ered its 2017 growth fore­cast to 0.1 per cent from 0.4 per cent, cit­ing OPEC pro­duc­tion cuts, un­cer­tainty over oil prices and the struc­tural re­forms the coun­try is un­der­tak­ing to re­duce its re­liance on crude, it said in a state­ment con­clud­ing its Ar­ti­cle IV con­sul­ta­tion. The IMF also low­ered its non-oil growth pro­jec­tion to 1.7 per cent from 2.1 per cent - com­pared with ac­tual growth of 0.2 per cent in 2016.

Lower oil prices and aus­ter­ity mea­sures are weigh­ing on Saudi Ara­bia’s econ­omy, which con­tracted in the first quar­ter for the first time since 2009. Even so, the fund said it wel­comed the gov­ern­ment’s di­rec­tion, which would help the fis­cal deficit “nar­row sub­stan­tially in the com­ing years.”

“Non oil growth is ex­pected to pick up this year and over­all growth is ex­pected to strengthen over the medium term as struc­tural re­forms are im­ple­mented,” the IMF board said in the state­ment. It cau­tioned the gov­ern­ment to mon­i­tor the im­pact of the fis­cal mea­sures and to “make cor­rec­tions if needed.”

Saudi Ara­bia’s fis­cal deficit is ex­pected to nar­row to 9.3 per cent of gross do­mes­tic prod­uct in 2017 and to just un­der one per cent by 2022, from 17.2 per cent last year, the fund said.

The IMF com­mended Saudi Ara­bia’s plan to re­move en­ergy sub­si­dies, en­cour­ag­ing a “more grad­ual phas­ing of the price in­creases to al­low house­holds and busi­nesses more time to ad­just.” It also said the king­dom’s ex­change-rate peg to the dol­lar “re­mains ap­pro­pri­ate given the struc­ture” of the econ­omy.

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