Non-oil growth in Saudi Arabia registers modest recovery: IMF

The non-oil real GDP growth rate in Saudi Arabia registered “modest recovery” in the first half of 2017, the International Monetary Fund (IMF) said in a recent report.

It estimated overall Gulf Cooperation Council’s (GCC) non-oil growth expected to rise to 2.6 percent this year from 1.8 percent in 2016, driven by the slowing pace of fiscal consolidation and improving liquidity conditions.

The report revealed a pickup in the purchasing managers’ index (PMI) for Saudi Arabia and United Arab Emirates (UAE) from the lower levels seen during 2016. 

However, the IMF noted that overall real GDP growth is likely to slow to 0.5 percent in 2017 from 2.2 percent in 2016 due to lower oil output.  

“Growth prospects in the medium-term will remain subdued amid relatively low oil prices and geopolitical risks,” it added. 

The CPI inflation in four of the six GCC countries is likely to be "substantially lower" this year compared to 2016, driven by lower import prices and weaker economic conditions, the report said, adding inflation is expected to rise due to the planned introduction of the value-added tax (VAT). 

The Kingdom and the UAE will impose 5 percent VAT from January 2018.

With oil revenues increasing and fiscal consolidation underway, the IMF said fiscal deficits are expected to narrow considerably in countries such as Saudi Arabia, Bahrain, and Oman.

The cumulative budget deficits in the GCC region during 2018–22 stands at about $160 billion, the report said. 

Last week, King Salman bin Abdulaziz approved the allocation of a SAR 72 billion stimulus package to enhance the role of the private sector as the Kingdom continues to undertake economic reforms to diversify its oil-dependent economy.