The IMF's favorable report on Saudi Arabia highlights significant achievements, including record-low unemployment, strong economic growth, and rising women's labor force participation, exceeding Vision 2030 targets.
The report praises Saudi Arabia’s successful macroeconomic policies and regulatory reforms, which have spurred non-oil sector growth, attracted foreign investment, and enhanced digital and financial innovations.
The IMF also acknowledges Saudi Arabia’s proactive environmental measures, including a major green hydrogen project and plans for a large carbon capture plant, reflecting its commitment to sustainability and Vision 2030 goals.
Riyadh, September 5, 2024 — The International Monetary Fund (IMF) has released a highly positive evaluation of Saudi Arabia following its recent Article IV consultations with the Kingdom. The report underscores the impressive progress Saudi Arabia has made in its financial and regulatory reforms, which have played a crucial role in accelerating economic growth, controlling inflation, and achieving record-low unemployment rates. The IMF commended Saudi Arabia’s ambitious economic transformation efforts, particularly those aligned with the Saudi Vision 2030, which aims to diversify the economy and reduce its reliance on oil.
The IMF’s assessment highlights the Kingdom’s effective macroeconomic policies and transformational changes that have significantly boosted the growth of non-oil sectors. The report notes that employment levels have surpassed pre-COVID figures, with a notable increase in women’s participation in the labor force, which has risen to over 35%. This achievement exceeds the Vision 2030 target of 30%, reflecting the success of Saudi Arabia’s gender inclusion initiatives. Furthermore, the IMF praised Saudi Arabia’s strategic long-term financing plans, which support Vision 2030’s initiatives and projects while effectively managing the risks of economic overheating. The report emphasizes that the Kingdom’s strong fiscal position and low sovereign debt risks, coupled with substantial financial reserves, have helped mitigate the impacts of global and regional economic uncertainties.
The IMF also lauded Saudi Arabia’s ongoing regulatory reforms, which include streamlining administrative processes, enhancing human capital, and improving governance. These measures have fostered a more dynamic private sector and attracted increased foreign direct investment. The report particularly noted the significant strides made in digital transformation and artificial intelligence, which are integral to supporting and advancing the Kingdom’s economic goals.
Moreover, the IMF Executive Directors acknowledged Saudi Arabia’s prominent role in global financial governance, including its chairmanship of the International Monetary and Financial Committee (IMFC) within the IMF. This leadership role has contributed to international efforts to address pressing global economic challenges. The report highlights the increased activity in the services sector, which includes transportation, trade, tourism, and finance, with consumption growth reaching an impressive 5.7%.
In a notable development, foreign investment license applications in Saudi Arabia surged to record levels in 2023, nearly doubling from the previous year. The report revealed that 330 companies applied for licenses to establish their regional headquarters in the Kingdom, underscoring its growing appeal as a business hub. The IMF also reviewed the banking sector’s robust performance, noting its strong solvency and liquidity, and its capacity to absorb economic shocks. The report highlighted the sector’s improved profitability, infrastructure, and competitive stance, affirming its resilience and efficiency.
The report further noted a remarkable 14.2% increase in the Saudi Stock Exchange (Tadawul) index in 2023, outperforming the Morgan Stanley Emerging Markets Index, which grew by 7%. This growth reflects advancements in the investment environment and the introduction of three new digital banks, which are expected to enhance financial inclusion and competitiveness through their innovative and flexible approaches.
Additionally, the IMF recognized Saudi Arabia’s proactive management of real estate lending risks through a range of government support measures. The Kingdom’s banking sector’s strength, comprehensive mortgage regulations, and other supportive initiatives have played a crucial role in this effort. The report also highlighted improvements in the national assessment matrix for money laundering and terrorist financing risks, noting advancements in data analysis and reporting by fintech companies.
Looking ahead, the IMF projects a 3.5% growth in the non-oil sector for 2024, driven by strong domestic demand. Inflation is expected to remain stable at around 2%, supported by the Saudi Riyal’s peg to the US dollar and policies aligned with Vision 2030. The IMF also commended the Kingdom’s commitment to environmental sustainability, noting its low carbon intensity compared to major producers. The report highlighted Saudi Arabia’s successful acquisition of a 30-year green hydrogen purchase agreement for the NEOM project, reflecting its dedication to renewable energy.
In addition, the Saudi government plans to develop one of the world’s largest carbon capture and storage plants by 2027, with a capacity of 9 million tons of carbon dioxide annually, aimed at sequestering approximately 44 million tons of carbon annually by 2035. The IMF also noted ongoing efforts to sequester 1.3 million tons of carbon annually through initiatives at the SABIC Plant and Uthmaniyah Gas Plant, showcasing the Kingdom’s commitment to environmental stewardship and sustainable development.