Saudi Arabia’s economic reforms are going well, the International Monetary Fund (IMF) said after annual consultations with authorities
However, the IMF has urged the Government not to boost spending in line with climbing oil prices.
“Saudi Arabia is making good progress in implementing its ambitious reform program under Vision 2030,” Tim Callen, head of an IMF team which held talks with Saudi officials over 12 days this month, said in a statement late on Tuesday, Reuters reported.
Callen continued that economic growth would probably start picking up this year, after gross domestic product shrank last year for the first time since 2009, adding that the Government remains committed to wide-ranging economic and social reforms to transform the economy away from its traditional reliance on oil and to create a more dynamic private sector that creates jobs for the growing working-age population.
Last year the IMF warned Riyadh not to slash its budget deficit too rapidly for fear of damaging the economy which helped to convince authorities at the end of last year to push back the date for balancing the budget to 2023 from 2020. However earlier this week Callen struck a different note, saying authorities should “resist the temptation to re-expand government spending in line with higher oil prices,” Reuters added.
Riyadh could have much greater export revenues than it had expected following a surge in Brent crude to multi-year highs of around $80 a barrel from below $65 in mid-February.
To compensate for slumping private sector investment, the Saudi Government plans to use state money to jump-start strategic non-oil industries, such as shipbuilding and tourism, through vehicles such as the Public Investment Fund (PIF), which Callen warned was not a long-term substitute for private sector growth.
“While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own,” he said in the Reuters report.