Saudi Arabia can maintain slower pace of fiscal adjustment: IMF official

Saudi Arabia can maintain a slower pace of its fiscal adjustment measures in order to help ease any pressures on its people and businesses, the International Monetary Fund (IMF) said on Wednesday.

“Last year, we said Saudi (Arabia) can slower the pace of its fiscal adjustment,” Jihad Azour, director of Middle East and Central Asia Department at IMF, told Argaam.

“We still consider that given the levels of reserves that they have, pacing the adjustments a bit slower is the right thing,” he said, speaking on the sidelines of a conference in Dubai to launch the Fund’s MENA Regional Economic Outlook report.

Azour, however, added that the Kingdom will need to keep the momentum on balancing the budget by 2023 and, “therefore, a certain number of measures are still needed.”

Going forward the oil exporting countries in the MENA region should look at accelerating fiscal reforms, while maintaining fiscal consolidation, Azour said during the conference.

Talking about the recent economic and social reforms introduced by Saudi Crown Prince Mohammed bin Salman in the Kingdom, Azour said the steps are in the right direction.

"But like in any program that is large, implementation is key," he said.

In the outlook report, the IMF noted that despite a slowdown in the regional economic activity in 2016-17, financial sectors remained broadly resilient.

Credit growth, however, remained subdued in most countries, reflecting weak consumer, government, and government-related enterprise.

This led to countries adopting policy measures to ease access to financing, it said.

"For example, in Saudi Arabia, capital market restrictions on foreign investors have been eased, and the loan-to-value ratio for first-time home buyers has been increased," the report said.

"While these reforms are not a direct consequence of weak credit growth, they may support a faster recovery," it added.

Last month, the IMF had revised upwards its forecast on Saudi Arabia’s 2018 economic growth to 1.7 percent, an increase of 0.1 percentage point from its January projections.

In terms of oil prices, Azour said the near-term outlook remains "uncertain," which will continue to weigh on oil exporters in the region.

Over the medium-term outlook for oil prices remains subdued, IMF said.

While noting that the Fund does not provide estimates on oil prices, Azour said the oil futures indicate that prices will go back to $58-$60 by 2019-20.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com