RIYADH, Saudi Arabia,
Sept. 4, 2024 /PRNewswire/ -- The
International Monetary Fund (IMF) issued a positive report on the
Kingdom of Saudi Arabia following
the conclusion of the Article IV consultations with Saudi Arabia. The IMF report confirmed that
Saudi Arabia's financial and
regulatory reform agenda contributed to accelerating the Saudi
economy's growth, containing inflation, and reducing the
unemployment rate to its lowest levels ever. The IMF praised the
ongoing economic transformation and efforts to diversify the
economy under the Saudi Vision 2030.
The IMF Article IV Consultation report commended the
macroeconomic policies and transformational changes implemented by
the Kingdom, which contributed to enhancing the growth of non-oil
activities. The report also noted that Saudi reforms led to rising
employment, which now exceeds pre-Covid figures, and that the rate
of women's participation in the labor market rose to more than 35%,
exceeding the Saudi Vision 2030 target of 30%.
The IMF welcomed Saudi Arabia's
measures of conducting the long-term financing planning that
supports the implementation of the initiatives, programs, and
projects of Vision 2030; while mitigating the risks of overheating.
The report also stressed that the Kingdom's fiscal space is strong,
and that sovereign debt risks are low, adding that the abundance of
financial reserves in Saudi Arabia
has limited the impact of global and regional challenges.
The IMF report stressed that the ongoing reforms in the
Kingdom—including ensuring the effective implementation of
regulations, streamlining fees, enhancing human capital, increasing
the participation of Saudi women in the labor market, facilitating
access to land and financing, and improving governance—have
contributed to enhancing private sector growth and attracting more
foreign direct investment, in addition to the significant progress
in the field of digital transformation and artificial intelligence
that support these efforts.
The IMF Executive Directors commended Saudi's leadership role in
multilateral fora, including its chairmanship of the International
Monetary and Financial Committee (IMFC) in the IMF, contributing to
efforts to address global challenges.
The report also noted the increased activity in the services
sector—including transportation, trade, tourism and finance—as the
growth in consumption that reached 5.7%.
The IMF said that foreign investment license applications
reached record levels in 2023, as they approximately doubled from
2022, including the 330 companies applying for licenses to
establish their regional headquarters in the Kingdom.
The report reviewed the banking sector developments in the
Kingdom, stressing its strong levels of solvency and liquidity, and
its flexibility to shocks. The IMF noted that the banking sector is
on strong footing, and also noted the efficiency of banking
mediation, according to indicators of profitability,
infrastructure, and competitiveness.
The IMF report also noted the rise in the Saudi Stock Exchange
(Tadawul) index of 14.2% in 2023, surpassing the Morgan Stanley
Emerging Markets Index of 7%, while noting the progress in the
technical environment enabling investment, and the licensing of
three digital banks. The IMF stressed their contribution to
enhancing financial inclusion and competitiveness as these banks
are characterized by flexibility and innovation.
The IMF noted the Kingdom's containment of risks resulting from
the rapid growth of real estate lending, through diverse government
support, the strength of banks, full recourse mortgages, and other
supportive measures. It also highlighted improvements in automating
the national assessment matrix for money laundering and terrorist
financing risks, and enhancing the accuracy of data analysis
related to risks received from reporting entities, including
fintech companies.
The IMF report noted that the increase in non-oil revenues
reflects the effectiveness of existing reforms, which directly
contributed to enhancing compliance, praising the alignment of
customs procedures with international best practices.
The IMF expected the non-oil sector (which includes government
activities) to grow by 3.5% in 2024, supported by strong domestic
demand. The IMF also stated that it is probable the inflation rate
in the Kingdom remains stable at around 2% over the medium term,
supported by the Saudi Riyals peg to the US dollar, and local
policies consistent with Saudi Vision 2030.
The IMF confirmed that the Kingdom has one of the lowest carbon
intensity levels among all major producers, due to ongoing
environmental reforms and the Kingdom's efforts to achieve net zero
by 2060. The report noted the Kingdom's success in securing a
30-year purchase agreement for the green hydrogen project in NEOM,
to achieve its efforts to utilize renewable energy sources.
In order to sequester approximately 44 million tons annually by
2035, the IMF noted that the Saudi government intends to build one
of the largest carbon capture and storage plants in the world,
which will be operational by 2027, with a capacity of 9 million
tons of carbon dioxide annually. The IMF noted the Kingdom's
current efforts to sequester 1.3 million tons of carbon annually
through the SABIC Plant and Uthmaniyah Gas Plant Department.
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